Question

Which of the following statements it not true:

A. Public goods may cause free-riding behavior

B. After buying insurance, people do not care that their safety is an adverse selection behavior

C. In the example in class, there is no market equilibrium in which only one type of umbrella is manufactured

D. Sharecropping cannot reach the best level of effort.

Answer 1

Option C: there is no market equilibrium in which only one type of umbrella is produced

Example given in class: not known , all the other options are true,so market equilibrium will be explained to help you understand the concept and the question better.

Market equilibrium is a point of intersection between the demand and supply corresponding to which we get the market price and the quantity exchanged in the market between buyers and sellers. As the price rises demand falls and supply rises so striking equilibrium is important in determining the market price and quantity combination. If the price of a single type of umbrella corresponds the equilibrium then there will a quantity transacted and hence market equilibrium will exist.