Regardless of whether or not screening or signaling occurs in markets with adverse selection, the equilibrium will always be less efficient than an equilibrium in the same competitive market if there were no asymmetric information.
Answer the following statement true (T) or false (F)
True
Rationale: In the absence of signals or screens, adverse selection gives rise to missing markets which in turn leads to inefficiency. Even if signals or screens re-establish these markets, they are costly -- and so overall surplus is lower because the cost of the signals or screens has to be covered.
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a. True b. False Indicate whether the statement is true or false
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