Author Question: Adverse selection is created by A) incentives to change behavior after two parties have reached ... (Read 61 times)

tiara099 · **on:** Jun 29, 2018

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 · **Reply #1 on:** Jun 29, 2018

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.