Which of the following represent examples of adverse selection?
A. Unhealthy people are more likely to want health insurance.
B. Careless drivers purchasing extra auto insurance.
C. Risk averse individuals choosing to buy extra insurance.
D. all of the above
E. A and B only
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Externalities
A. are not reflected in market prices, so they can be a source of economic inefficiency.
B. do become reflected in market prices, so they can be a source of economic inefficiency.
C. are not reflected in market prices, so they do not adversely affect economic efficiency.
D. do become reflected in market prices, so they do not adversely affect economic efficiency.
E. may or may not become reflected in market prices, but do not have an impact on economic efficiency in either event.
When there are externalities, economic efficiency can be achieved without government intervention
A. at no time.
B. when the externality affects many people and property rights are not well defined.
C. when the externality affects many people and property rights are well defined.
D. when the externality affects only a few parties and property rights are not well defined.
E. when the externality affects only a few parties and property rights are well defined.
Common property rights
A. increase efficiency over individual property rights.
B. enable the Coase theorem to work.
C. are responsible for the increasing success of preservation of African elephants.
D. are responsible for the increasing success of preservation of worldwide fishing resources.
E. result in faster depletion of resources than do individual property rights.
Which of the following move the handling of a common property resource closest to efficiency?
A. ensuring that the sellers of the resource are perfectly competitive
B. ensuring that the seller of the resource is a monopolist
C. banning the sale of the resource
D. banning the use of the resource
E. assigning a usage fee for access to the resource
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