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How can the existence of asymmetric information provide the rationale for government intervention?
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- Explain the nature and consequences of asymmetric information in a market for used appliances. Identify available options to reduce the problem.Adverse selection and moral hazard are problems caused by asymmetric information. Explain their difference with reference to real daily examples.How does the presence of asymmetric information in the used car market impact the behavior of buyers, sellers, and market outcomes?
- Define the characteristics of a vulnerable consumer. Considering ethics, should there be greater government regulation with respect to selling to vulnerable consumers? Within the context of a Christian worldview, why should businesses consider the methods of marketing to vulnerable consumers? Be sure to support your responses with evidence from the readings or additional references.In your opinion, what strategies or measures could be implemented to reduce income tax cheating and promote more accurate reporting?Assume that the market for lemons has unraveled. Who is harmed by the existence of asymmetric information? Who is helped?
- Asap (a) Please briefly articulate the problem of asymmetric information between venture capitalists and entrepreneurs in shape of adverse selection.Name two solutions to adverse selection in insurance and explain how they work.Recognize adverseselection and summarize the ways in whichit can be reduced.
- It was felt that liability insurance would undermine the tort system, which has as its central theorem the concept that the individual responsible for injuring another should be made to pay for that injury. Do you think the existence of liability insurance causes one to be less careful than he or she might otherwise be?What are three economic negatives inherent in imperfect information and what would be an alternative approach rationale for each? Thanks.Describe how the following facts represent solutions to problems of asymmetric information. a. Auto insurance rates are higher for teenagers than for nonteenagers. b. Your car insurance coverage probably includes a deductible—an amount that you have to pay out of pocket before your insurance coverage kicks in. c. Many states have laws like Virginia’s that give customers the right to keep or inspect parts that are removed by an auto mechanic.
