Which of the following actions best illustrates adverse selection?
a. A person purposely chooses bonds of corporations with high default risk because of the high returns.
b. A person dislikes losing $400 more than he likes winning $400.
c. After obtaining automobile insurance a person drives less carefully than before.
d. A person intending to take up dangerous hobbies applies for life insurance.
d
You might also like to view...
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
In the long run, the real interest rate is determined by
A) the nominal interest rate. B) saving supply and investment demand. C) the multiplier effect. D) the expected inflation rate. E) Fed actions.
Why does an existing less efficient technology drive out a new, more efficient technology?
a. The existing technology is a network that has become locked in. b. People are receptive to the new technology. c. The new technology is costlier to hire. d. The existing technology is a network that has become locked out. e. The government imposes taxes on the new technology.
If MRP = MLC, the firm
a. is employing the optimal quantity of workers b. should decrease the quantity of labor it employs c. should lower the wage rate d. should increase the quantity of labor it employs e. should raise the wage rate