Markets that are more likely to be subject to adverse selection problems are those where:
A. the market relies on independent certifiers of quality.
B. the goods sold in that market are highly uniform in quality.
C. information is easily available to consumers and sellers.
D. there is an imbalance of information between buyers and sellers
Answer: D
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The above figure shows the U.S. market for flip-flops. When there is no international trade, the U.S. price is ________ per flip-flop and the U.S. quantity is ________ flip-flops
A) $14; 300,000 B) $14; 500,000 C) $14; 700,000 D) $12; 700,000 E) $12; 300,000
Because new plastic and recycled plastic are substitutes, as the price of newly produced plastic increases,
A) the demand curve for recycled plastic shifts to the left. B) there is a movement up along the demand curve for recycled plastic. C) there is a movement down along the demand curve for recycled plastic. D) the demand curve for recycled plastic shifts to the right.
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Use the law of diminishing marginal utility to explain why a pizza parlor might price pizzas in the following way: "Buy one pizza for $12, get the second pizza for $6." Why not simply charge $9 per pizza instead?