Most transactions could be viewed as examples of asymmetric information since consumers typically have less information about a good or service than the producer. Because the consumer has less information than the producer, the consumer will tend to... esc O Buy the same amount of the product that they would if they had all the information. O Forgo all purchases and only buy goods and services when they have all the information about a product. Buy less of the product than they would if they had all the information. Buy more of the product than they would if they had all the information 10 F 106 6 >C C JUL 21 $ 10 3 do L átv % 5 Search or type URL A C SA MacBook Pro J & 1 * C + C 31h) W P 1 +

Most transactions could be viewed as examples of asymmetric information since consumers typically have less information about a good or service than the producer. Because the consumer has less information than the producer, the consumer will tend to... esc O Buy the same amount of the product that they would if they had all the information. O Forgo all purchases and only buy goods and services when they have all the information about a product. Buy less of the product than they would if they had all the information. Buy more of the product than they would if they had all the information 10 F 106 6 >C C JUL 21 $ 10 3 do L átv % 5 Search or type URL A C SA MacBook Pro J & 1 * C + C 31h) W P 1 +

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Moral Hazard

The moral is a person's behavior towards himself /herself, society, organization, and others. Hazard is something that is happening and is not good. A person may be morally good or bad. It depends on his attitude, ethics, integrity, and values. A person may have the highest reverence for money to that for the truth. In this case, the person may lie and it is said that the person is morally bad.

Question

Most transactions could be viewed as examples of asymmetric information since consumers typically
have less information about a good or service than the producer.
Because the consumer has less information than the producer, the consumer will tend to...
esc
O Buy the same amount of the product that they would if they had all the information.
O Forgo all purchases and only buy goods and services when they have all the information about a product.
Buy less of the product than they would if they had all the information.
Buy more of the product than they would if they had all the information
10
F
106
6
>C
C
JUL
21
$
10
3
do L
átv
%
5
Search or type URL
A
C
SA
MacBook Pro
J &
1
* C
+
C
31h)
W
P
1 +

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Using 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…
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A. From the graph below explain how an insurance plan which provides the buyer a $15,000 wealth level, regardless of any uncertain event, is a good deal for the buyer? In other words, what does the distance between points D’ and C’ represent? Note we are referring to D prime, not D. B. Considering the graph below, can you explain the difference between expected utility and certainty utility?
Please see the image below and help answer the questions.
4. A taproom owner is trying to determine how to structure his manager's compensation. One option he considers is a flat salary of $70,000 per year. The second option is a base salary of $30,000 plus 15% of the taproom's profit. If the manager puts a lot of effort into her job, the taproom's annual profit will be $500,000 with 75% probability and $100,000 with 25% probability. If the manager exerts only modest effort, the taproom's profit will be $500,000 with 25% probability and $100,000 with 75% probability. The manager's opportunity cost of putting a lot of effort into her job is $50,000, while her opportunity cost of exerting only modest effort is $25,000. a. Draw the game tree for the interaction between the taproom owner and the manager. Assume that the taproom owner moves first. b. What is the equilibrium outcome for this game? What kind of contract should the taproom owner offer? What level of effort will the manager choose? Explain.
#4. Without a vaccine, there is a 10% chance that Steven will get the coronavirus in 2021. If he gets vaccinated, that risk falls to 1%. Without a vaccines, Steven gets -6000 utils if he gets covid and 0 utils if he stays healthy. Because of side effects, he gets -100 utils from the vaccine if he stays healthy and -6100 if he gets sick anyways. What will Steven do? a. He will get vaccinated b. He will not get vaccinated c. He will get vaccinated if he is risk-averse but not if he is risk-loving d. He will get vaccinated if he is risk-loving but not if he is risk-averse