Suppose That a Large Tornado Destroys the Fleet of Fire

question 352

Multiple Choice

Suppose that a large tornado destroys the fleet of fire trucks for the city of Omaha, Nebraska. What happens to the earnings of firefighters in Omaha?

• A)The reduction in the supply of fire trucks reduces the marginal productivities of Omaha firefighters, which causes the equilibrium wage to fall.
• B)The reduction in the supply of fire trucks increases the marginal productivities of Omaha firefighters, which causes the equilibrium wage to fall.
• C)The reduction in the supply of fire trucks reduces the marginal productivities of Omaha firefighters, which causes the equilibrium wage to rise.
• D)The reduction in the supply of fire trucks increases the marginal productivities of Omaha firefighters, which causes the equilibrium wage to rise.

Understand the economics behind the sale and purchase of used cars under conditions of asymmetric information.

Analyze equilibrium outcomes in markets with asymmetric information.

Understand the role of incentives in shaping economic agents' decisions.

Understand the concept of market equilibrium in a lemon market.

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Definitions:

Experimental Research

Experimental research is a methodological approach that systematically manipulates one variable to determine its effect on another variable, within a controlled environment.

Random Assignment

A method used in experiments to distribute participants across various control and experimental groups in a way that each participant has an equal chance of being assigned to any group, minimizing biases.

Preexisting Differences

Differences among study participants that exist before the application of an experimental manipulation.

Correlational Research

A type of non-experimental research method that examines the relationship between two variables without manipulating them.