Which of the following is an application of the adverse-selection problem?
a. a customer driving more recklessly after buying car insurance.
b. a teenager "hanging out" with friends his or her parents do not approve of.
c. shareholders offering a high-powered incentive contract to a manager.
d. an auto repairman claiming that the repairs are more extensive than they actually are.
d
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Opportunity cost exists because
a. technology is fixed at any point in time b. the law of comparative advantage is working c. resources are scarce but wants are unlimited d. the value of lost opportunities varies from person to person e. efficiency is measured by the monetary cost of an activity
The "Bubbles, Bubbles" soap bubble firm's price and cost data are: price = $10; MR = $10; MC = $10; ATC = $10 . This firm is
a. making an economic profit of $10 b. in monopolistic competition and in short-run equilibrium c. about to shut down because economic profit is zero d. a monopolist with a relatively inelastic demand e. in a perfectly competitive market and in long-run equilibrium