What is adverse selection? What will be an ideal ...

[kshipps]

What is adverse selection?
 
  What will be an ideal response?

Question 2

The U.S. can produce pizza for 7.50 each and barrels of beer for 37.50 each, and Germany can produce pizza for 5 each and barrels of beer for 15 each ( is the symbol for the euro, the currency Germany uses). If the exchange rate is 1.
 
  50 / then A) the U.S. has a comparative advantage in the production of beer.
  B) neither country has a comparative advantage in the production of beer.
  C) the U.S. has a comparative advantage in the production of pizza.
  D) the U.S. has a comparative advantage in the production of beer and pizza.

[zenzy]

Answer to Question 1

A situation in which the risk associated with the existence of asymmetric information causes one party not to enter into a contractual relationship with another party.

Answer to Question 2

C

[kshipps]

Excellent

[momolu]

TYSM