Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 17, Problem 10RQ
To determine
Define the efficiency wage.
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What are some ways a seller of goods might reassure a possible buyer who is faced with imperfect information?
The text points out that asymmetric information can have deleterious effects on market outcomes. a. Explain how asymmetric information about a hidden action or a hidden characteristic can lead to moral hazard or adverse selection. b. Discuss a few tactics that managers can use to overcome these problems.
What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?
Chapter 17 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- The adverse selection problem is least likely in which of the following occupations? explain Lawyer Barber College professor Marketing Analyst Managerarrow_forwardSomeone indicated that employee’s absence from work despite meeting the eight hours per day requirement affect productivity and increase cost of business. If an employee makes up the hours by coming early and leaving late, how can you call it an example of moral hazard when the manager can easily correct this behavior? Please explain to the class.arrow_forwardHow might adverse selection make it difficult for an insurance market to operate?arrow_forward
- are whistleblower payouts to informants, funded by the federal government due to the Federal False Claims Act, are becoming more and more common?arrow_forwardGive an example, real or imaginary, of an adverse selection problem. Your example must clearly point out: what information is private/asymmetric (is it an attribute or an action?) which party has the private information when does the information asymmetry arise (before or after the contract/transaction?) what is the likely outcome and in which way it can be inefficientarrow_forwardWhat is moral hazard?arrow_forward
- What are adverse selection and moral hazard?arrow_forwardIf people get higher pay from insurance than their premiums, will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse selection? How will an insurance company deal with these problems?arrow_forward
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