A utility function is a mathematical formula that assigns to each consumption bundle a numeric value that represents the:
A. opportunity cost of consuming the bundle.
B. consumer's relative well-being from consuming the bundle.
C. price the consumer would pay for the bundle.
D. rates of substitution of the goods in the bundle.
B. consumer's relative well-being from consuming the bundle.
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An example of adverse selection is a. purchasing a new car sight unseen based on the recommendation of a neighbor. b. high health-insurance premiums resulting from the poor health of people who buy policies
c. suppliers who charge more for better quality clothing than for lower quality clothing. d. being talked into buying a low-quality item because the price is lower.
Economists believe that the same explanation for the rapid growth of costs applies to services, theatrical performances and restaurant meals.
Answer the following statement true (T) or false (F)