Whenever there is adverse selection, there will be missing market.
Answer the following statement true (T) or false (F)
False
Rationale: If no attempt is made to uncover information, markets will be missing in the sense that either a pooling equilibrium emerges (with markets targeted at individual types missing) or, in a separating equilibrium, a restricted output choice is offered to low cost types in order to keep high cost types from buying in the low cost market. But if there are successful signals and/or screens, no markets might be missing.
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What will be an ideal response?
Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
Refer to the information provided in Figure 9.2 below to answer the question(s) that follow.
Figure 9.2Refer to Figure 9.2. The firm's ________ point is at a price of $6.
A. shut down B. profit maximizing C. break even D. loss maximizing