Factor Markets Are Different from Product Markets in an Important

question 16

Multiple Choice

Factor markets are different from product markets in an important way, because:

• A) factor markets are fraught with disequilibrium
• B) the factor supply function is likely to be downward-sloping
• C) factor demand is a derived demand
• D) factor demand is likely to be upward-sloping

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Definitions:

Unobservable Actions

Actions taken by individuals or entities that cannot be directly observed or monitored, often leading to issues of information asymmetry.

Moral Hazard

A situation in insurance and economics where one party is more likely to take risks because they do not bear the full consequences of their actions, often due to asymmetric information.

Transaction

An exchange or transfer of goods, services, or funds between two or more parties.

Benefit

An advantage or positive outcome gained from something, often used in the context of employment perks or features of a product or service.