Whether or not a separating equilibrium exists in a competitive market with adverse selection depends on what fraction of consumers is of the high cost type and what fraction is of the low cost type.
Answer the following statement true (T) or false (F)
False
Rationale: Under a separating equilibrium, high cost types are not interested in buying low cost insurance (because only a restricted set of such policies is offered) -- nor are low cost types interested in buying high-priced insurance. What fraction of each type there is in the population is then irrelevant.
You might also like to view...
Pension plans in which employer contributions are set by the plan and benefits depend on the performance of the assets in the plan is called a
A) defined benefit plan. B) defined contribution plan. C) a fully vested plan. D) an unfunded plan.
Money is used in an economy because: a. goods and services are produced in accordance with demand
b. the exchange of goods for money is less troublesome than barter. c. some goods or services are difficult to provide because of the scarcity of resources. d. some merchants may offer goods for a select clientele.