The adverse selection problem suggests that:
A. the ratio of lemons (low quality) to plums (high quality) is likely to be high.
B. the ratio of plums (high quality) to lemons (low quality) is likely to be high.
C. the price of lemons (low quality) will be below buyer's willingness to pay.
D. plums (high quality) will sell for more than most buyers' willingness to pay.
Answer: A
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Which of the following government policies ensures market efficiency?
A) subsidy B) tax C) price regulations D) quantity regulations E) None of the above answers is correct.
The FDIC handles most bank failures by the purchase and assumption method because
A) the existence of uninsured deposits (over $100,000 ) makes runs and panics possible. B) it allows the FDIC to avoid paying off large deposits when a bank fails. C) most banks have become too big for the FDIC to allow them to fail. D) it allows the FDIC to write checks legally to pay all deposits, even those over $100,000.
The present value of a payment to be made in the future falls as
a. the interest rate rises and the time until the payment is made increases. b. the interest rate rises and the time until the payment is made decreases. c. the interest rate falls and the time until the payment is made increases. d. the interest rate falls and the time until the payment is made decreases.
A drought that decreases Russian wheat production will
A. shift the supply curve of US corn to the right. B. shift the supply curve of US corn to the left. C. shift the demand curve for US corn to the right. D. shift the demand curve for US corn to the left.