Adverse selection:

A. occurs when buyers and sellers have different information about the riskiness of a situation.
B. can result in failure to complete transactions that would have been possible if both sides had the same information.
C. refers to the tendency for people with higher risk to be drawn toward insurance.
D. All of these statements are true.

D. All of these statements are true.

Economics

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Market specialization and the rise of the division of labor

A) create important conditions for economic growth. B) help explain why some nations are wealthier than others. C) do both of the above. D) do neither of the above.

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Exhibit 30-2

?

A. Curve X, because if there is a positive externality, negative external benefits are associated with it: social costs external benefits - private benefits, therefore the marginal social benefit curve must lie below the marginal private benefit curve. B. Curve X, because if there is a positive externality, external benefits are associated with it: social benefits = external benefits + private benefits, therefore the marginal social benefit curve must lie below the marginal private benefit curve. C. Curve Y, because if there is a positive externality, external costs are associated with it: social benefits = external costs + private benefits, therefore the marginal social benefit curve must lie above the marginal private benefit cost curve. D. Curve Y, because if there is a positive externality, external benefits are associated with it: social benefits = external benefits + private benefits, therefore the marginal social benefit curve must lie above the marginal private benefit curve.

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The interest rate charged on a risk-free loan exceeds the rate on a risky loan

a. True b. False

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If the nominal interest rate is 6% and the inflation rate is 9%, then the real interest rate is

A) -3%. B) 3%. C) 6.67%. D) 15%.

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