A consequence of adverse selection is:
A. buyers and sellers may lose surplus they would have gained with more complete information.
B. too many transactions occur of low value.
C. sellers violate the law when giving false information to buyers.
A. buyers and sellers may lose surplus they would have gained with more complete information.
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An increase in the demand for peanut butter, a normal good, can be caused by a(n):
a. decrease in consumer income. b. increase in the price of jams, jellies, and preserves. c. decrease in the price of bread. d. drought in Georgia that destroyed 30 percent of the peanut crop. e. decrease in the price of bologna.
Price ceilings often generate
A) market clearing prices. B) rapid increases in supply to meet the excess demand. C) equilibriums that utilize rationing by price. D) black markets.
Consider the purely competitive firm pictured below. The firm is earning:
A. Normal profits, since its price is above AVC
B. Economic profits, since its price is above AVC
C. Normal profits, since its price just covers ATC
D. Losses, since it is operating at the shutdown point
"As the price of personal computers continues to fall, demand increases." This headline is inaccurate because:
A. a change in the price of personal computers shifts the supply curve. B. a falling price of personal computers increases the quantity demanded, not demand. C. the statement is backwards: increased demand leads to lower prices. D. a change in the price of personal computers shifts the demand curve.