An insurance company is likely to attract customers like Clancy who want to purchase insurance because he knows better that the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above?
A) moral hazard
B) adverse selection
C) asymmetric information
D) economic irrationality
Answer: B
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The figure above shows a preference map for Sarah, who likes hamburgers and milk shakes
a) Which two combinations contain the same amount of hamburgers but different quantities of shakes? b) Which combination(s) does Sarah most prefer? Why? c) Which combination(s) does Sarah least prefer? Why? d) Between which combinations is Sarah indifferent? Why?
If a regulator forced a natural monopolist to set P = MC
A) the monopolist would earn economic profits. B) the monopolist would suffer economic losses. C) the monopolist would break even. D) the monopolist would earn monopolistic profits.
Interdependence in pricing may leading to
A) predatory pricing. B) price-fixing agreements. C) price bundling. D) shifts in elasticities.
The current supply of Rembrandt paintings:
a. is perfectly elastic b. is elastic. c. is unit elastic. d. is perfectly inelastic.