Adverse selection or the principal-agent problem

Assignment Help Business Economics
Reference no: EM131159678

Analyze the situations involving risk below to determine if they involve Moral Hazard (M), Adverse Selection (A), or the Principal-Agent Problem (P). For Moral Hazard write “M” in the blank. For Adverse Selection write “A” in the blank. For the Principal-Agent Problem write “P” in the blank. (1 pt. EACH; 5 pts. TOTAL)

a. Only the owners of sick pets purchase pet health insurance.

b. A mechanic tells you that you need new brakes, but you refuse to buy new brakes because you’re afraid she might be trying to rip you off.

c. In the season after signing a big contract, an athlete no longer gives his/her full effort, leading to a productivity drop from the previous year.

d. Bureaucrats have more information than politicians and may use that information to further their own interests.

e. Seeing that his passenger is a tourist, a taxicab driver takes a longer route to the destination in order to collect a higher fare.

Reference no: EM131159678

Questions Cloud

Determine two challenges managers may encounter : Review the video titled "Managing performance throughout the year" (4 min 26 s). Next, suggest at least three (3) creative methods to check in with your employees throughout the year, other than the regular annual performance evaluation, within a ..
How would you define the new world order : Since the end of the "Cold War" there has been much talk about a "New World Order." How would you define the New World Order and what role would the U.S. play? Give examples.
Why is it an important aspect of the legal system : What is common law? Where did it develop? Why is it an important aspect of the legal system? Minimum 500 words. Outline the features and components of the Japanese political system. Highlight the interaction among its different parts and the influe..
Contrast the following two works of art : Contrast the following two works of art. Use specific details drawn from both works of art to illustrate what you consider the single most important difference between them.
Adverse selection or the principal-agent problem : Analyze the situations involving risk below to determine if they involve Moral Hazard (M), Adverse Selection (A), or the Principal-Agent Problem (P). For Moral Hazard write “M” in the blank.
Should training process ever take place without action plan : How can employee development activities be beneficial for companies and their employees? What are some examples of activities you've personally seen in companies that were helpful?
How many pounds per square inch would this be : How many pounds per square inch would this be?
Identify groups that were affected by industrialization : Identify three specific groups that were affected by industrialization and provide two examples for each group describing how the group was affected.
Analyze the types of inferential statistics : Develop a 1,050-word report in which you: Identify the types of descriptive statistics that might be best for summarizing the data, if you were to collect a sample. Analyze the types of inferential statistics that might be best for analyzing the data..

Reviews

Write a Review

 

Business Economics Questions & Answers

  Supply curve to shift to right in market for gasoline

Which of the following would cause the supply curve to shift to the right in the market for gasoline?

  According to the law of comparative advantage

What is your opinion of this economics course? Did it meet your expectations? What suggestions can you offer for improvement of this course for future students? Is there a downside to the global economy evolving to be based completely and wholly on t..

  If the implicit cost of a ton of greenhouse gas

A large electric utility company releases 62 million tons of greenhouse gases in to the environment each year. A company has committed to spending $1.2 billion in capital over the next 5 years to reduce its annual emissions by 5%. More will be spent ..

  About a differentiated-product bertrand duopoly

Which of the following is NOT true about a differentiated-product Bertrand duopoly?

  Suppose a consumers level of satisfaction

Suppose a consumer's level of satisfaction is given by AB2 and he/she has a total of $10 to spend on goods A and B. If the price of A is $1 and the price of B is $2, and assuming you can only purchase whole units (not fractional) of A and B, how many..

  Discuss two major economic worries

Discuss the two major economic worries faced by American politicians, unemployment and inflation, and the options available to address them.

  Diminishing marginal utility

Pretend that you have just been surprised with a genuine e-mail that says you have just been selected by your favourite pizza delivery company that every day for the next month you will receive your favourite pizza for lunch and another of that same ..

  What is the one month forward exchange rate

Suppose that the CIP holds. Suppose that dollar and euro 1-month interest rates are equal at 5%. The current spot rate in 1$/euro. What is the one month forward exchange rate?

  Use the empirical rule for normal distributions

The average rent in a city is $1,500 per month with a standard deviation of $250. Assume rent follows the normal distribution. What percentage of rents are between $1,250 and $1,750? What percentage of rents are greater than $2,000?

  Consider the compensation strategy

Now let’s consider the compensation strategy. What does “b” equal for the Milford sales force? If you were to redesign the compensation strategy to use optimal incentives, what would you do?

  Q use the subsequent demand schedule to determine total

q. use the subsequent demand schedule to determine total also marginal revenues for each possible level of

  Decides to reconsider its asian strategy

Florida Citrus Inc. (FCI) produces and sells a highly popular sports drink in the North American market. For many years, it has sold in the Asian market through a Tokyo-based importer. The contract with the importer is up for renewal, and FCI decides..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd