Microeconomics, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134461786
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 16, Problem 4Q
To determine
Mechanism using which warranties and third-party certifications are able to reverse the problem of adverse selection.
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How does the presence of asymmetric information in the used car market impact the behavior of buyers, sellers, and market outcomes?
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Chapter 16 Solutions
Microeconomics, Student Value Edition (2nd Edition)
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Similar questions
- Distinguish between adverse selection and moral hazard as they relate to the insurance industry.arrow_forwardAdverse selection and moral hazard are problems caused by asymmetric information. Explain their difference with reference to real daily examples.arrow_forwardproblem involing moral hazardarrow_forward
- Name two solutions to adverse selection in insurance and explain how they work.arrow_forwardwhy is adverse selection important in healthcare insurance markets.arrow_forwardDescribe some healthcare situations in which an agent has taken advantage of a principal. Then describe some healthcare transactions that have not taken place because of fears about asymmetric information.arrow_forward
- How does adverse selection impact the pricing and sustainability of insurance markets?arrow_forwardWhcih of the following could help overcome the problem of adverse selection in the used car market? Multiple Choice The buyer could have a mechanic inspect the car before buying it. The government could enact disclosure laws requiring that potential buyers be told all material facts about the condition of a vehicle for sale. The seller could include a warranty. all of the abovearrow_forwardwhat was the relationship between the premiums, deductibles, and coverage limits for your insurance coverage?arrow_forward
- The used car market can become a “lemon” market, where sellers of poor quality used cars will stay in the market, while sellers of good quality used cars will exit the market. Why is this happening? Is this adverse selection or moral hazard? Give an argumentarrow_forwardYou have a prescription drug insurance plan with a $500 deductible, 25% coinsurance after the deductible, and an out of pocket maximum of $1,250. What would you owe in cost sharing if you had $2,075 of prescription drug claims during the year?arrow_forward
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