1. An example of adverse selection is:
a) When an insurer’s risk pool becomes biased because only people with high risk of cancer buy cancer insurance.
b) People engage in more risky behavior after buying insurance.
c) Firms preferring to hire people with academic degrees not because of specific skills they possess, but because they have demonstrated perseverance and learning ability.
d) none of the above.
2. The price a perfectly competitive firm receives for its output
A. will not change in response to changes in market demand and supply because the firm is a price taker.
B. is determined by the interaction of all sellers and all buyers in the? firm's market.
C. is determined by the interaction of the firm and all of the consumers who buy from the firm.
D. will be lowered by the firm in order to sell more output.