1. Under which of the following circumstances is the principal-agent problem likely to be most serious.

Between general practitioners and patients.

Between surgeons and patients.

Between hospitals and nurses.

Between dentists and physicians.

Between physicians and lawyers.

2. Inoculation programs against certain diseases such as small pox, polio, and whooping cough create

public goods.

positive externalities in consumption.

nonrival goods.

nonexcludable goods.

external costs to society equal to the costs of the program.

3. The government agency that controls the development and availability of new medical discoveries, including pharmaceutical drugs is

the Health Care Financing Administration.

the Food and Drug Administration.

the Centers for Disease Control.

the National Institutes for Health.

the Federal Emergency Medical Administration.