Which of the following is not correct?
a. An example of adverse selection is man who tries to sell his used car without disclosing that it needs a new transmission.
b. The "invisible hand" of a free market will always fix the problems of adverse selection and moral hazard.
c. An employer may try to prevent a moral hazard problem by paying her workers an efficiency wage.
d. One interpretation of gift giving is that it reflects asymmetric information and signaling.
b
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Competitive markets with no external costs or benefits and no government price ceilings, floors, taxes or subsidies ________ efficient. According to the "It's not fair if the rules aren't fair" idea of fairness, competitive markets ________ fair
A) are; are B) are; are not C) are not; are D) are not; are not
According to the textbook, the private provision of television programming may not be socially optimal because:
A. the government strictly regulates the market. B. consumers don't pay for broadcast television. C. programs are chosen on the basis of audience size rather than the value to the audience. D. most consumers don't like watching television commercials.
If a perfectly competitive firm in the short run is producing where P = ATC = MC, this firm is
A) incurring losses. B) earning economic profits. C) obliged to shut down. D) on the downward-sloping portion of its demand curve. E) at its profit-maximizing output level.
The total of consumer plus producer surplus is largest at the market equilibrium.
Answer the following statement true (T) or false (F)