Which of the following is not an example of an adverse selection problem?
a. A homeowner purchases a refrigerator that the seller knows has a history of leaking.
b. A highly productive worker quits her job after a salary cut knowing that she can make more at a different job.
c. A major league baseball player performs poorly in his second season after signing a multi-million dollar contract.
d. A contractor uses low quality materials for construction but charges for higher quality materials.
c
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When the government controls the price of a product, causing the market price to be below the free market equilibrium price,
A) some consumers gain from the price controls and other consumers lose. B) all producers gain from the price controls. C) both producers and consumers gain. D) all consumers are better-off.
The legal system in the United States tends
A) to support monopolies. B) to actively discourage unionization. C) to discourage the entry of new firms into industries. D) to promote competition.
The interest rate on some Brazilian bank accounts is 700 percent per year. If you put 1 Brazilian real (Brazil's currency) in a bank today, it will be worth 8 reals next year! Why then don't we all wire our U.S. dollars to Brazilian banks? a. The Brazilian government keeps the exchange rate fixed during the year, which wipes out your financial gain
b. The Brazilian balance of payments becomes negative, which results in higher taxes, much of it from your financial gain. c. The U.S. government prohibits U.S. investment in foreign financial institutions. d. People engaging in arbitrage will quickly adjust the rates to make the Brazilian interest rate no more attractive than U.S. interest rates. e. The exchange rate reals per dollar adjusts during the year so that you are no better off once you convert your reals back into dollars.
In the real world, ____ factors that affect demand and supply can change at once.
a. many b. isolated c. no d. psychological