MYECON LAB W/PEARSON ETEXT MICROECON>IP
9th Edition
ISBN: 9780134153988
Author: PINDYCK
Publisher: PEARSON
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Question
Chapter 17, Problem 8E
(a)
To determine
The practice of subsidizing the consumer reports for symmetric information.
(b)
To determine
The practice of imposing the quality standards.
(c)
To determine
The practice of providing extensive warranty on high quality goods.
(d)
To determine
The practice of requiring all firms to provide extensive warranties.
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Chapter 17 Solutions
MYECON LAB W/PEARSON ETEXT MICROECON>IP
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- It was taught 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?arrow_forwardAdverse selection is good ? like the The Affordable Care Act (Obamacare) deals with the problem of adverse selection by using the power of the government to fine individuals who do not sign up for health insurance. do you think it brings benefits or not ?arrow_forwardAssume that the market for lemons has unraveled. Who is harmed by the existence of asymmetric information? Who is helped?arrow_forward
- 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.arrow_forwardGive an example, real or imaginary, of a moral hazard problem. Again, 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_forwardUsing Freakonomics Chp. 2 Explain how such innovations as the Internet have affected the prevalence of information asymmetries. 6. Explain how information asymmetries facilitated the corporate scandals that occurred in the early 2000s. 7. Explain how the choice of terms a real estate agent uses to describe a particular property conveys additional information about the property, and hence the price a potential buyer might be able to successfully offer the seller. 8. Choose some evidence from Ch. 2 that illustrates how the combination of an information asymmetry and fear can lead to inefficient outcomes. Explain how the introduction of the element of fear makes the problem of the information asymmetry even worse. 9. Identify the evidence the authors offer to support their claim that real estate agents exploit an information asymmetry to their client’s detriment. 10. According to the voting data from the Weakest Link, which two groups of people are most likely to be discriminated…arrow_forward
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