Which of the Following Reduces the Consequences of Asymmetric Information

question 186

Multiple Choice

Which of the following reduces the consequences of asymmetric information?

• A)used-car dealers not offering warranties to reduce buyers' risk
• B)insurance companies having zero deductibles
• C)states having "lemon laws" that offer compensation to buyers of new or used cars that turn out to be lemons
• D)property insurers increasing premiums for those who install security systems
• E)health-insurance providers marketing their products in a way that attracts very sick customers

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Definitions:

MC

In economics, MC typically refers to Marginal Cost, which is the cost of producing one more unit of a good.

ATC

The total cost per unit of production, calculated by dividing the overall production cost by the number of units produced.

Production Function

A production function describes the relationship between inputs used in production and the output generated from those inputs.

Law Of Diminishing Marginal Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other inputs remain constant.