If insurance companies knew how risk-averse their customers were:
A. diversification would not occur.
B. risk pooling would not occur.
C. policies would be perfectly diversified, resulting in lower premiums for everyone.
D. adverse selection would not occur.
Answer: D
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You decide to carry a letter of recommendation from your college professor while going for your first interview. This is an example of ________
A) sniping B) signaling C) hedging D) speculating
If the supply curve of cigarettes shifts to the left, quantity demanded for cigarettes
A) will decrease substantially. B) will increase substantially. C) will slightly increase. D) will slightly decrease.
A resident of the U.S. just purchased a share of stock on the London stock market. As far as the U.S. balance of payments this purchase will
A) have no influence on the balance of payments since stock is not a good or service. B) be entered as a unilateral transfer in the current account. C) be entered in the capital account. D) require special drawing rights.
Suppose the market demand for milk is Qd = 150 - 5P. Additionally, suppose that a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. Suppose the demand for milk doubles. If in the short run the number of firms is fixed and their fixed costs are sunk, how much does each of the active firms produce in the short run equilibrium?
A. 5 units B. 6 units C. 10 units D. 20 units