When asymmetric information problems drive high quality products from a market, we refer to this situation as:
A) adverse selection.
B) moral hazard.
C) a lemons problem.
D) A and C are correct.
E) B and C are correct.
D
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Consider a consumer with a choice set that emerges from an exogenous income I. Suppose that, as a result of changes in a consumer's economic circumstances, the budget line rotates outward, with the vertical intercept remaining unchanged but the horizontal intercept shifting to the right. Demonstrate, using the budget line equation, how this could have happened if the price of the good on the horizontal axis did not change?
What will be an ideal response?
Summarize the three conditions cited in the text under which a cartel is most likely to succeed. Of these three, which do you think is most important? Why?
What will be an ideal response?
The free-rider problem is encountered when
A) someone benefits from the consumption of a public good without paying his or her full share. B) all individuals who consume a public good pay for it. C) all goods consumed and produced are private goods. D) all individuals are willing to pay for what they consume.
Which of the following statements is true?
A. Karl Marx coined the term "the invisible hand." B. Adam Smith wrote Das Kapital. C. Karl Marx believed the state would eventually wither away leaving a worker's paradise. D. Adam Smith believed that individuals unselfishly pursue the public good.