The adverse selection problem is a likely explanation for the fact that
a. some parents use video cameras to monitor the nannies caring for their children.
b. some corporate managers were recently sent to prison for enriching themselves at the expense of shareholders.
c. people in average health may be discouraged from buying health insurance by the high price.
d. gifts can be interpreted as signals.
c
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In general, the more parties there are to a negotiation, the more difficult it becomes to successfully reach an agreement with all parties
Indicate whether the statement is true or false
Suppose that two drug manufacturers represent the only two producers in the industry and further suppose that the companies can spend a lot of money on research to develop new drug treatment. If only one develops a product, they make very high profits, but if they produce similar drugs, their profits are lower given the high research costs and they split the market for their products. But if they both sell their current products and spend little on research, they can still make good profits. The best outcome that they could achieve would be for the two firms to
A. ignore each other’s behavior. B. always conduct research activities. C. form a cartel. D. reach a Nash equilibrium.
Which of the following statements is not correct?
a. If GDP is rising faster than debt, the government is, in some sense, living within its means. b. The ratio of debt to GDP in the United States has always been less than one. c. Debts during wars may distribute the burden of fighting the war more evenly across generations. d. During times of peace in the United States, the ratio of debt to GDP sometimes rose.
A price ceiling that is set below the equilibrium price will result in:
A. a shortage of the good. B. a surplus of the good. C. higher total economic surplus. D. higher producer surplus.