Whether or not a pooling equilibrium exists in a competitive market with adverse selection depends on what fraction of consumers is of the high cost type and what fraction is of the low cost type.
Answer the following statement true (T) or false (F)
True
Rationale: The pooling equilibrium must offer insurance at zero-profit prices when everyone is buying at the same price. The pooling contract must furthermore be preferable to low cost consumers to a restricted lower-priced policy set at a benefit level that is sufficiently low to keep high cost types from demanding any at that price.These conditions are more likely to be satisfied when there are relatively few low-cost types.
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To decrease anxiety in its most accomplished teachers, a school decides to offer them tenure, to help them concentrate on teaching better. Instead it notices that even the best of the teachers started to get sloppy with their work. The school did not foresee
a. Adverse selection b. Moral hazard c. All of the above d. None of the above
The income transferred by the government from a citizen who is earning income to another citizen is referred to as:
a. fiscal spending. b. transfer payment. c. budgetary allowance. d. taxation. e. internal debt.
Consumers face a higher tax burden when demand is more elastic, other things constant
a. True b. False Indicate whether the statement is true or false
Americans buying Japanese cars create a
A) demand for U.S. dollars and supply of Japanese yen. B) demand for both U.S. dollars and Japanese yen. C) supply of U.S. dollars and demand for Japanese yen. D) supply of both U.S. dollars and Japanese yen.