Adverse selection:
A. refers to the tendency for people with higher risk to be drawn toward insurance.
B. can result in failure to complete transactions that would have been possible if both sides had the same information.
C. occurs when buyers and sellers have different information about the riskiness of a situation.
D. All of these statements are true.
Answer: D
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If the relative price of one product rises and labor is mobile, then:
a. the percentage increase in the equilibrium real wage will be exactly the same as the percentage increase in the relative price. b. the percentage increase in the equilibrium real wage will be lower than the percentage increase in the relative price. c. the percentage increase in the equilibrium real wage will be higher than the percentage increase in the relative price. d. the equilibrium real wage will not change.
Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,
a. the demand curve for physicals shifts to the right. b. the supply curve for physicals shifts to the left. c. the quantity demanded of physicals increases and the quantity supplied of physicals decreases. d. the number of physicals performed will increase.