Refer to Figure 6.3. The situation pictured is one of A) ...

[Tazate]

Refer to Figure 6.3. The situation pictured is one of
 
  A) constant returns to scale, because the line through the origin is linear.
  B) decreasing returns to scale, because the isoquants are convex.
  C) decreasing returns to scale, because doubling inputs results in less than double the amount of output.
  D) increasing returns to scale, because the isoquants are convex.
  E) increasing returns to scale, because doubling inputs results in more than double the amount of output.

Question 2

The presence of deposit insurance in the savings and loan industry
 
  A) created an adverse selection problem because good S&Ls were forced out of the market.
  B) solved its own adverse selection problem because it pushed badly managed S&Ls out of the market.
  C) contributed to depositor moral hazard but did not involve a moral hazard problem with owners.
  D) contributed to moral hazard by owners but did not involve a moral hazard problem with depositors.
  E) contributed to both depositor moral hazard and moral hazard by owners.

[ansleighelindsey]

Answer to Question 1

C

Answer to Question 2

E

[Tazate]

Thanks for the timely response, appreciate it

[Joy Chen]

YES! Correct, THANKS for helping me on my review