As it applies to insurance, the adverse selection problem is the tendency for:
A. those most likely to collect on insurance to buy it.
B. those who buy insurance to take less precaution in avoiding the insured risk.
C. sellers to price discriminate.
D. sellers to restrict output and charge high prices.
Answer: A
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A firm is said to operate with constant returns to scale if its production cost increases by four times when its output is doubled.
Answer the following statement true (T) or false (F)
Marginal utility is the
A) total satisfaction received from consuming a given number of units of a product. B) average satisfaction received from consuming a product. C) extra satisfaction received from consuming one more unit of a product. D) satisfaction achieved when a consumer has had enough of a product.
In most economies, resources are allocated by
A) a central planning board. B) a dictator. C) the combined and decentralized actions of millions of people. D) the majority's will.
Transactions costs are the
A) costs of using the Coase theorem. B) opportunity costs of conducting a transaction. C) external marginal costs of the externality. D) reason why taxes cannot affect the inefficiency resulting from an external cost. E) external costs when a firm pollutes.