New Products Provide a Classic Case of the Consumer Information

question 36

Multiple Choice

New products provide a classic case of the consumer information problem. However, in some cases consumers partially solve the problem by trusting the "brand name" of the producer of the new product. Because firms spend millions of dollars advertising and maintaining their brand names, the likelihood of a "brand name" firm intentionally selling a dangerous or shoddy new product is

• A) high because big firms are always after a quick dollar.
• B) high because their brand name is a communal property right.
• C) low because big firms do not make mistakes.
• D) low because the firm with a brand name has a lot to lose if word spreads about bad consumer experiences.

Recognize the relevance and implications of the Phillips Curve in both short and long run.

Distinguish between the effects of fiscal and monetary policy on economic variables.

Identify how government policies affect the natural rate of unemployment.

Analyze the impact of changes in the money supply on aggregate demand and inflation.

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Definitions:

Rents

Payments made periodically by a tenant to a landlord in exchange for the use of land, a building, or other property.

Supply of Loanable Funds

The total amount of funds that lenders are willing to loan at a given interest rate in an economy.

Elastic

Describes a situation in economics where the quantity demanded or supplied of a good changes significantly in response to changes in its price.

Demand for Land

The desire or need by individuals or businesses to purchase or lease land for various uses such as agriculture, commercial, or residential purposes.