An Example of Mechanism Design Is

question 127

Multiple Choice

An example of mechanism design is

• A) a non-profit charity that pays all employees a low fixed salary.
• B) welfare policy that has no limits on the amount of time a person can collect benefits.
• C) health insurance with co-pays.
• D) lower prices for airline ticket purchases made several months prior to the travel date.

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Definitions:

Marginal Utility

The additional satisfaction or usefulness obtained from acquiring or consuming one more unit of a product or service.

Diminishing

A principle often seen where there is a decrease in the marginal (incremental) output of a production process as the amount of a single factor of production increases while others remain constant.

Donut

A fried dough confectionery or dessert food, usually sweet, and often served with a variety of toppings or fillings.

Total Utility

The total satisfaction received from consuming a particular quantity of a good or service.