If you are willing to purchase a house for 500,00 . and you purchase the house for 500,00 . , this transaction will generate:
a. There is no surplus created
b. 0 worth of seller surplus and unknown amount of buyer surplus
c. 0 worth of buyer surplus and unknown amount of seller surplus
d. Not information provided
QUESTION 2Which of the following can a firm use to reduce competition in the market?
a. Locking in customers to long term contracts
b. Seek an exclusive government contract
c. Acquire patents
d. All the above
QUESTION 3If the company can correctly anticipate the adverse selection, what premiums would it charge?
a. 2500
b. 2600
c. 1000
d. 1100
QUESTION 4If you are willing to purchase a house for 300,00 . and you purchase the house for 275,000 . this transaction will generate:
a. There is no surplus created
b. 25,00 . worth of seller surplus and unknown amount of buyer surplus
c. 10,00 . worth of buyer surplus and 15,00 . of seller surplus
d. 25,00 . worth of buyer surplus and unknown amount of seller surplus
QUESTION 5All of these allow a firm to differentiate its product, except
a. Product branding
b. Reducing quality
c. Advertising
d. Limiting availability
QUESTION 6Suppose the insurance company cannot tell them apart but expects them to be different values and charges them an average premium of 1850 . How much profit would it make?
a. 1850
b. Zero-they would break even
c. They would make a loss of 650
d. They would make a loss of 1100
QUESTION 7If you are willing to sell your car business for 500,00 . and someone offers you 420,00 . for it, this transaction will generate:
a. There is no surplus created
b. 80,00 . worth of seller surplus and unknown amount of buyer surplus
c. 40,00 . worth of buyer surplus and 40,00 . of seller surplus
d. 80,00 . worth of buyer surplus and unknown amount of seller surplus