Which of the following is the best example of an "adverse selection" scenario (from a business perspective)?
A. An attorney engages in legally-risky tactics after discovering that a potential settlement is larger than was initially expected.
B. An employee begins stealing from the company after being passed over for a promotion.
C. A habitually reckless driver chooses not to buy auto insurance.
D. A person who drinks and smokes heavily conceals this information before buying health insurance.
Answer: A person who drinks and smokes heavily conceals this information before buying health insurance.
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Assume that a firm's marginal cost is $10 and the elasticity of demand is -2. We can conclude that the firm's profit maximizing price is approximately
A) $20. B) $5. C) $10. D) The answer cannot be determined without additional information.
In a one-stage game:
A. at least one participant observes a choice by another participant before making some decision. B. each participant makes all of his choices before observing any choice by any other participant. C. at least one participant makes his choice before observing the choices made by other participants. D. one participant has full information of the other players' choices before making his choice.