Figure 19.1 displays changes in the size of private inventories. Based on the figure, in which month is the size of private inventories likely to have been lowest?

Assume that black beans and rice are staples in the diet of one particular family. How could you tell if these goods were complements, substitutes, or unrelated goods?

a. If the price of black beans rose and the consumption of rice remained the same, they would be substitutes. b. If the price of black beans rose and the consumption of rice increased, they would be substitutes. c. If the price of black beans rose and the consumption of rice decreased, they would be substitutes. d. If the price of black beans rose and the consumption of both goods remained the same, they would be complements. e. There is no way to determine whether these goods are complements, substitutes, or unrelated goods.

Define the term adverse selection. Why is an insurance company unable to offer fair odds when it faces an adverse selection problem? How might the insurance company deal with an adverse selection problem?

What will be an ideal response?