Which of the following examples is an adverse-selection

Assignment Help Microeconomics
Reference no: EM13373359

Which of the following examples is an adverse-selection problem and which is a moral hazard incentive problem?  Explain why.  In each case, give one method that the firm might use to reduce the problem.

a. A Grand Forks restaurant wants to buy a used car for deliveries, but is afraid of buying a lemon. 

b. A bar decides to offer an all-you-can-drink promotion that is sold for a fixed price.  The bar discovers that the customers for this promotion are not its usual clientele.  Instead, the customers tend be politicians who consume an amazing amount of liquor.  The bar loses money on the promotion.

c. A car wash owner hires a manager who promises to work long hours. When the owner is out of town, the manager goes home early.  This action results in lost profits for the firm. 

d. The CEO of Best Buy takes actions that reduce the value of Best Buy stock but increase his utility.

e. Jenna buys a used Playstation3 from a classmate. She soon discovers it doesn't play movie or game disks and stops playing games after 15 to 20 minutes.

Reference no: EM13373359

Questions Cloud

In paragraphs 12 and 14 king refers to alligators and : in paragraphs 12 and 14 king refers to alligators and gators. what does the alligator represent? what does king mean
1 an essay exploring the question what would be the results : 1. an essay exploring the question what would be the results of changing the legal driving age to 18? would be aan
1 sun resortssun resorts has a hotel on a caribbean island : 1. sun resortssun resorts has a hotel on a caribbean island. it recently spent money to lobby the government to build a
The following game matrix shows the strategies and payoffs : the following game matrix shows the strategies and payoffs to sony and philips as they choose what connection
Which of the following examples is an adverse-selection : which of the following examples is an adverse-selection problem and which is a moral hazard incentive problem?nbsp
Mayo destination water park center offers family fun : mayo destination water park center offers family fun year-round in the northstar state to locals and out-of-state
Question detail nbspcontrolsoft inc is a supplier of : question detail nbspcontrolsoft inc. is a supplier of inventory management and control software that is popular with
1 your company bright paints is one of a dozen companies : 1. your company bright paints is one of a dozen companies manufacturing a special reflective paint used for traffic
The kingdom of tradia is a small open export-oriented : the kingdom of tradia is a small open export-oriented country. suppose initially that the world price of stuff is 150.

Reviews

Write a Review

Microeconomics Questions & Answers

  Why property rights could solve many of the problems

It has been argued that many of the problems with negative externalities - such as pollution, or the "tragedy of the commons" - could be better solved if there were clearly defined, protected and enforced property rights.

  Do drug bans increase or decrease drug-related crime

Pharmaceutical drugs have an inelastic demand, and computers have an elastic demand. Suppose that technological advance doubles the supply of both products (that is, the quantity supplied at each price is twice what it was).

  Terms of business stealing and product variety externalities

A hotel owner, having heard that new hotels consider to open in area, says, We have too many hotels in this town already. Statistics show that vacancy rates average 20% on any given night.

  Analyse the effects of increased demand for biofuels

Analyse the impact of an increase in the price of crops and a (proportionately smaller) decrease in the price of fuel on a low income person who spends most of her income on food (derived from crops).

  Find the total product and average product

Find the total product, average product and marginal product for integer values of L from 1 to 9. Plot the total product on a graph and the average and marginal product on another as shown in class.

  What values of f can a profit-maximizing firm charging

Suppose a monopolist producing Q units of output faces the demand curve P =20 -Q. Its total cost when producing Q units of output is TC = F + Q2, where F is a fixed cost. The marginal cost is MC = 2Q. a) For what values of F can a profit-maximizing..

  What factors can contribute to unemployment

What factors can contribute to unemployment and how can technology lead to greater unemployment, or is it a benefit to the economy?

  Monetary policy tools

Decribe how the Bank of Canada can affect interest rates and money supply in Canada. Be specific about the tools that are available to the Bank for such purposes.

  Issue that legislation attempts to address

What is the legislation/policy that will be analyzed in this paper and what is the problem/issue that this legislation attempts to address?

  Pros and cons of making the decision to buy a new car

Discuss all of the Pros and Cons of making the decision to buy a new car and we require to consider about macro & microeconomics and any other psychological, sociological or business concepts that may affect the decision.

  Find the equilibrium price and quantity

A monopolist firm faces the following cost curve: C(Q) = 10Q + 300, where Q is the output produced. The demand for its product is given by P = 50 - .

  What would be the benefits of an open free market

1. What do you think will be the basic problem of financing Social Security in the next 25 to 30 years 2. What would be the benefits of an open, free market for human organs 3. What do you think of a recommendation to privatize Social Security

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