An investment opportunity has two possible outcomes. The expected value of the investment opportunity is $250. One outcome yields a $100 payoff and has a probability of 0.25. What is the payoff of the other outcome?

One reason why adverse selection problems arise in health insurance markets is that

A) sick people are more likely to want health insurance than healthy people. B) because of advances in medical technology, people are living longer. These medical advances are costly and drive up the price of insurance for everyone. C) fewer men and women are choosing medical careers because of the increase in the cost of malpractice insurance. D) the average age of citizens of the United States has increased in recent years, and will continue to increase over the next 20 to 30 years. As older citizens retire, more and more of their medical bills will have to be paid by younger workers.

Suppose a restaurant is trying to determine how much to charge for a bowl of chili, and decides to run an experiment to see how much its customers are willing to pay by allowing them to set their own price for this menu item

a. Is charging a customer the price he or she is willing to pay for the bowl of chili an example of price discrimination? Briefly explain. b. What is it called when a firm knows every consumer's willingness to pay, and can charge every consumer a different price? What happens to consumer surplus in this situation?