Which of the following is true of adverse selection?
a. It can result when one of the parties to a transaction has little information about the quality of the goods involved.
b. It can cause the quality of goods traded to fall, if quality detection costs are high
c. It can be a difficult problem to overcome, because it is not individually rational for the transactor with the superior information to provide a truthful and complete disclosure.
d. All of the above are true.
d
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Suppose a U.S. government program subsidizes the production of domestic sugar producers and places a tariff (tax) on the importation of sugar from other countries. This program
A) helps the producers of sugar, but increase the opportunity cost of obtaining it. B) will reduce the opportunity cost of obtaining sugar and therefore lead to lower sugar prices. C) creates wealth, because the government is providing the subsidies and imposing the tariffs. D) promotes the production of goods that consumers value highly relative to cost.
If the actual rate of inflation turns out to be higher than the expected rate of inflation, what happens to the growth rate of output before expectations are updated?
What will be an ideal response?
Suppose that the elasticity of demand for hamburgers is 2.5 and price decreases by 14%. By what percentage will quantity demanded for hamburgers increase?
A. 2.5% B. 5.6% C. 25% D. 35%
What is the long-run financial problem for Medicare?
What will be an ideal response?