Please choose two of the question threads to answer. 1) Screening and Imperfect Information Asymmetric information refers to a market where one side (either the buyer or the seller, but usually the buyer) has less information than the other side of the market. When there is asymmetric information in a market, markets are inefficient because the side with less information doesn't want to take the risk involved in buying (or selling) the good or service. One method of solving this problem is through screening. Screening is a strategy one uses when they don't have information. A screen can be any indicator that lets the screener know if the good or service is reliable and will meet the screener's wants. Offer an example of when you used screening to solve a lack of information. What kind of screen did you use? Was the screen effective? Were you happy with the result? 2) Public Goods and Technology Public goods are defined as non-excludable and non-rival in consumption. If something is close to a public good (meaning that it is very difficult for sellers to exclude consumers or it is only rival in consumption at some times) we sometimes refer to it as a quasi-public good. Technology has made some goods or services quasi-public goods in that they are easier to share and sellers can't prevent consumers for using the good without paying for it. Offer an example of a good that has become a public (or quasi-public) good due to technology. Explain how technology has made this good non-rival in consumption or non-excludable. Is there a free rider problem with the good you mentioned? How can the free rider problem be addressed in this example? 3) Negative Externalities Offer an example of a good or service with negative externalities that is currently not regulated or taxed by the government. What are the negative externalities associated with your example? How should the government address these negative externalities? Explain your reasoning. What are the trade-offs associated with this government policy? Are the trade-offs worth it? Explain. 4) Signaling and Imperfect Information Asymmetric information refers to a market where one side (either the buyer or the seller, but usually the buyer) has less information than the other side of the market. When there is asymmetric information in a market, markets are inefficient because the side with less information doesn't want to take the risk involved in buying (or selling) the good or service. One method of solving this problem is through signaling. Signaling is a strategy one uses when they have information. The goal is to use a signal to convince the buyer that the good or service that is being sold is quality and will meet the buyer's wants. Offer an example of a company that uses a signal to help sell its product. What is the signal? What information is the signal trying to convey? Do you think the signal is effective? Why or why not? Does this signal improve market efficiency? Why or why not? 5) Price Signaling As you've read, oligopoly firms can earn more profits by cooperating. However, there are multiple reasons why these arrangements are difficult to maintain. One of these reasons is that firms cooperating to set prices and output is illegal. However, sometimes oligopoly firms can work around these legal restrictions by signaling price changes (and monitoring other firms' pricing decisions). Firms can coordinate their prices without explicitly working together. Can you think of an example where firms appear to be coordinating their prices? Explain. In your example, can you point to any signals that one firm may use to convince other firms to match their prices? based on your understanding, do you expect these methods to be sustainable? In other words, there are multiple reasons why oligopoly firms may have difficulty sustaining cooperation. Do you think your example avoids these other challenges? Explain your answers.

Please choose two of the question threads to answer. 1) Screening and Imperfect Information Asymmetric information refers to a market where one side (either the buyer or the seller, but usually the buyer) has less information than the other side of the market. When there is asymmetric information in a market, markets are inefficient because the side with less information doesn't want to take the risk involved in buying (or selling) the good or service. One method of solving this problem is through screening. Screening is a strategy one uses when they don't have information. A screen can be any indicator that lets the screener know if the good or service is reliable and will meet the screener's wants. Offer an example of when you used screening to solve a lack of information. What kind of screen did you use? Was the screen effective? Were you happy with the result? 2) Public Goods and Technology Public goods are defined as non-excludable and non-rival in consumption. If something is close to a public good (meaning that it is very difficult for sellers to exclude consumers or it is only rival in consumption at some times) we sometimes refer to it as a quasi-public good. Technology has made some goods or services quasi-public goods in that they are easier to share and sellers can't prevent consumers for using the good without paying for it. Offer an example of a good that has become a public (or quasi-public) good due to technology. Explain how technology has made this good non-rival in consumption or non-excludable. Is there a free rider problem with the good you mentioned? How can the free rider problem be addressed in this example? 3) Negative Externalities Offer an example of a good or service with negative externalities that is currently not regulated or taxed by the government. What are the negative externalities associated with your example? How should the government address these negative externalities? Explain your reasoning. What are the trade-offs associated with this government policy? Are the trade-offs worth it? Explain. 4) Signaling and Imperfect Information Asymmetric information refers to a market where one side (either the buyer or the seller, but usually the buyer) has less information than the other side of the market. When there is asymmetric information in a market, markets are inefficient because the side with less information doesn't want to take the risk involved in buying (or selling) the good or service. One method of solving this problem is through signaling. Signaling is a strategy one uses when they have information. The goal is to use a signal to convince the buyer that the good or service that is being sold is quality and will meet the buyer's wants. Offer an example of a company that uses a signal to help sell its product. What is the signal? What information is the signal trying to convey? Do you think the signal is effective? Why or why not? Does this signal improve market efficiency? Why or why not? 5) Price Signaling As you've read, oligopoly firms can earn more profits by cooperating. However, there are multiple reasons why these arrangements are difficult to maintain. One of these reasons is that firms cooperating to set prices and output is illegal. However, sometimes oligopoly firms can work around these legal restrictions by signaling price changes (and monitoring other firms' pricing decisions). Firms can coordinate their prices without explicitly working together. Can you think of an example where firms appear to be coordinating their prices? Explain. In your example, can you point to any signals that one firm may use to convince other firms to match their prices? based on your understanding, do you expect these methods to be sustainable? In other words, there are multiple reasons why oligopoly firms may have difficulty sustaining cooperation. Do you think your example avoids these other challenges? Explain your answers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please choose two of the question threads to answer.

1) Screening and Imperfect Information

Asymmetric information refers to a market where one side (either the buyer or the seller, but usually the buyer) has less information than the other side of the market. When there is asymmetric information in a market, markets are inefficient because the side with less information doesn't want to take the risk involved in buying (or selling) the good or service.

One method of solving this problem is through screening. Screening is a strategy one uses when they don't have information. A screen can be any indicator that lets the screener know if the good or service is reliable and will meet the screener's wants.

Offer an example of when you used screening to solve a lack of information. What kind of screen did you use?
Was the screen effective? Were you happy with the result?

2) Public Goods and Technology

Public goods are defined as non-excludable and non-rival in consumption. If something is close to a public good (meaning that it is very difficult for sellers to exclude consumers or it is only rival in consumption at some times) we sometimes refer to it as a quasi-public good. Technology has made some goods or services quasi-public goods in that they are easier to share and sellers can't prevent consumers for using the good without paying for it.

Offer an example of a good that has become a public (or quasi-public) good due to technology.
Explain how technology has made this good non-rival in consumption or non-excludable.
Is there a free rider problem with the good you mentioned?
How can the free rider problem be addressed in this example?

3) Negative Externalities

Offer an example of a good or service with negative externalities that is currently not regulated or taxed by the government.
What are the negative externalities associated with your example?
How should the government address these negative externalities? Explain your reasoning.
What are the trade-offs associated with this government policy? Are the trade-offs worth it? Explain.

4) Signaling and Imperfect Information

One method of solving this problem is through signaling. Signaling is a strategy one uses when they have information. The goal is to use a signal to convince the buyer that the good or service that is being sold is quality and will meet the buyer's wants.

Offer an example of a company that uses a signal to help sell its product. What is the signal?
What information is the signal trying to convey?
Do you think the signal is effective? Why or why not?
Does this signal improve market efficiency? Why or why not?

5) Price Signaling

As you've read, oligopoly firms can earn more profits by cooperating. However, there are multiple reasons why these arrangements are difficult to maintain. One of these reasons is that firms cooperating to set prices and output is illegal. However, sometimes oligopoly firms can work around these legal restrictions by signaling price changes (and monitoring other firms' pricing decisions). Firms can coordinate their prices without explicitly working together.

Can you think of an example where firms appear to be coordinating their prices? Explain.
In your example, can you point to any signals that one firm may use to convince other firms to match their prices?
based on your understanding, do you expect these methods to be sustainable? In other words, there are multiple reasons why oligopoly firms may have difficulty sustaining cooperation. Do you think your example avoids these other challenges? Explain your answers.

Definition Definition Degree to which financial markets incorporate all available information into the prices of assets. In a more efficient market, the prices reflect the available information more than that in a weak efficient market. It is difficult for investors to outperform the market in a strong efficient market. This is because all the available information is already discounted in the asset's price. However, in a weak-form efficiency, the market does not reflect all information in the asset's price. As a result, it becomes easier to generate better returns in a weak form or an inefficient market.

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