Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 16, Problem 4RQ
Why might it be difficult for a buyer and seller to agree on a price when imperfect information exists?
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Why is imperfect information a problem in market economies? Give a current example of how imperfect information causes a disruption in a market.
In circumstances of imperfect information should one expect the market to be efficient? Explain briefly.
What impact do asymmetric and imperfect information have on prices and quantities?
Group of answer choices
An unstable equilibrium.
A decline in prices or quantities of products sold.
One party (buyer/seller) will always be unhappy.
One party will be made better off, and the other party will be made worse off.
Chapter 16 Solutions
Principles of Economics 2e
Ch. 16 - For each of the following purchases, say whether...Ch. 16 - Why is there asymmetric information in the labor...Ch. 16 - Why is it difficult to measure health outcomes?Ch. 16 - Why might it be difficult for a buyer and seller...Ch. 16 - What do economists (and used-car dealers) mean by...Ch. 16 - What are some ways a seller of goods might...Ch. 16 - What are some ways a seller of labor (that is,...Ch. 16 - What are some ways that someone looking for a loan...Ch. 16 - What is an insurance premium?Ch. 16 - In an insurance system, would you expect each...
Ch. 16 - What is an actuarially fair insurance policy?Ch. 16 - What is the problem of moral hazard?Ch. 16 - How can moral hazard lead to more costly insurance...Ch. 16 - Define deductibles, copayments, and coinsurance.Ch. 16 - How can deductibles, copayments, and coinsurance...Ch. 16 - What is the key difference between a...Ch. 16 - How might adverse selection make it difficult for...Ch. 16 - What are some of the metrics economists use to...Ch. 16 - You are on the board of directors of a private...Ch. 16 - A website offers a place for people to buy and...Ch. 16 - How do you think the problem of moral hazard might...Ch. 16 - To what sorts of customers would an insurance...Ch. 16 - Using Exercise 16.20, sketch the effects in parts...
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Similar questions
- It is often costly to obtain the information necessary to make good decisions. Yet, your own interests can best be served by rationally weighing all options available to you. This requires informed decision making. Does this mean that making uninformed decisions is irrational? How do you determine how much information is the right amount?arrow_forwardBPO Services is in the business of digitizing information from forms that are filled out by hand. In 2006, a big client gave BPO a distribution of the forms that it digitized in house last year, and BPO estimated how much it would cost to digitize each form. Form Type Mix of Forms Form Cost A 0.5 $3.00 B 0.5 $1.00 The expected cost of digitizing a form is . Suppose the client and BPO agree to a deal, whereby the client pays BPO to digitize forms. The price of each form processed is equal to the expected cost of the form that you calculated in the previous part of the problem. Suppose that after the agreement, the client sends only forms of type A. The expected digitization cost per form of the forms sent by the client is . This leads to an expected loss of per form for BPO. (Hint: Do not round your answers. Enter the loss as a positive number.)arrow_forwardWhat are some ways a seller of goods might reassure a possible buyer who is faced with imperfect information?arrow_forward
- What are three economic negatives inherent in imperfect information and what would be an alternative approach rationale for each? Thanks.arrow_forwardPick a good and explain how asymmetric or imperfect information could impact the price and confidence of a buyer or seller.arrow_forwardDiscuss the consequences of asymmetric information for Market Equilibrium.arrow_forward
- What type of bias relies too heavily on one piece of information in making a final decision? A. Availability Heuristic Bias B. Bandwagon Effect C. Anchoring Biasarrow_forwardIn the famous court case Stambovsky v. Ackley a prospective homebuyer attempts to back out of a purchase after learning that the home was widely believed to be haunted since the current owner had it included in a tour of haunted homes. Prior to the prospective buyer backing out, what imperfect information situation applied to this situation? Explain.arrow_forwardcorrectly gives explanationarrow_forward
- We learned that we can use choice between a gamble over someone's best and worst outcomes and getting an outcome of interest (like getting pizza) for certain as a way to assign numeric values to utility (on a scale of 0 to 1). Using this method, if you are indifferent between the following: A gamble that has a 0.3 chance of your best possible outcome (and no lower chance), and a 0.7 chance of your worst possible outcome. Getting pizza for certain. it means that your utility for getting pizza is:arrow_forwardIf a risk-averse individual owns a home worth $100,000, and that individual is willing to pay $1,000 for an annual fire insurance policy that covers the entire loss in the event of a fire, then we know that?arrow_forwardExplanation is correctlyarrow_forward
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