Asymmetric information is
A) when a market failure occurs.
B) an externality.
C) when the producer has information on the product that the consumer lacks.
D) the regulatory price for a natural monopoly.
C
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Suppose that the total number of hours (T) is 720 and the wage rate is $10. Suppose further that all income is spent on consumption, so that the vertical axis is also total consumption.
(A) Sketch this graph. (B) Sketch the graph if a 5% consumption tax is imposed. (C) Can you say conclusively that a consumption tax will lower hours worked?
An indication that Insurance companies anticipate adverse selection is
a. they do not require a deductible b. they do not classify clients into different risk types according to their claim history c. they do not classify clients into different risk types according to pre-existing conditions d. they require a co-payment
A firm practicing direct price discrimination will charge a higher price to
a. Consumers with an elastic demand b. All consumers c. Consumers with an inelastic demand d. Consumers with unitary elastic demand
A monopolist union that desired to maximize its total wage bill (w ? l) would offer that quantity of labor for which:
a. labor's marginal productivity is zero. b. labor's wage falls to zero. c. the quantity of labor hired is as great as possible given the firm's demand curve. d. the marginal revenue from providing one more worker to the market is zero.