Adverse selection occurs when there is
A) full information.
B) unobserved behavior.
C) an unobserved characteristic.
D) a worker who shirks because his boss does not watch him.
C
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A business produces 5,00 . units per month. Costs include: $12,00 . on raw materials, $20,00 . on operators and $14,00 . on sales people. Other costs of running the factory were $50,00 . for rent and $30,00 . on other fixed overheads. In order to break even the selling price per unit will have to be:
a. $25.20 b. $29.60 c. $20.30 d. $28
Refer to the above supply and demand graph. Point A represents the current equilibrium level of output of this product and point B represents the optimal level of output from society's perspective. If government decides to correct this externality with a subsidy to consumers, then the:
A. demand curve will shift from D2 to D1. B. demand curve will shift from D1 to D2. C. supply curve will shift from S1 to S2. D. supply curve will shift from S2 to S1.