Adverse selection exists when
A. the parties on one side of the market, who have information not known to others, self select in a way that benefits the parties on the other side of the market.
B. the parties on one side of a market charge more for something than the parties on the other side of the market want to pay.
C. one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party.
D. the parties on one side of the market, who have information not known to others, self select in a way that adversely affects the parties on the other side of the market.
E. none of the above
Answer: D
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The theory of efficient markets suggests that the steep decline the value of stocks traded on the NASDAQ was due to
a. a speculative bubble. b. a response to new information about firms' expected future profitability.. c. a natural cycle in technology stock prices evidenced by charts of previous prices trends. d. moral hazard.
If income distribution in an economy is perfectly equal, the lowest quintile will earn 20% of total income
Indicate whether the statement is true or false
How might asymmetric information cause a well-managed bank to be abandoned by its depositors?
What will be an ideal response?
By itself, an increase in the number of suppliers in a market results in a
A) rightward shift in the supply curve. B) leftward shift in the supply curve. C) movement down along the supply curve. D) Both answers A and C are correct.