Adverse selection is created by A) incentives to change ...

[tiara099]

Adverse selection is created by
 
  A) incentives to change behavior after two parties have reached an agreement.
  B) risk.
  C) lump-sum taxes.
  D) private information.

Question 2

What is the best outcome for society: when firms in an oligopoly enter into a collusive agreement to operate as a monopoly or when they act as perfect competitors? Briefly explain your answer.
 
  What will be an ideal response?

[efwsefaw]

Answer to Question 1

D

Answer to Question 2

The best outcome for society is when the firms act as perfect competitors. Perfect competition produces the efficient quantity of output. A monopoly restricts the quantity of output it produces and creates a deadweight loss, which harms society So society is better off if the firms compete rather than collude and operate as a monopoly.

[tiara099]

Excellent

[Mochi]

Gracias!