Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 12, Problem 1MCQ
To determine
To find:
The option that correctly explains the market with asymmetric information.
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To properly protect consumers, _____.
a. tests of a product can safely assume that the product will be used in just the way that the manufacturer intends it to be used.
b. if a product poses a potential, serious threat, a company may need to take extraordinary measures to ensure continued safe use of it.
c. only new products, not established products, need to be tested.
d. accidents occur exclusively as a result of product misuse.
Can employees, managers, and executives have too much information?
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.
Chapter 12 Solutions
Foundations of Economics (8th Edition)
Ch. 12 - Prob. 1SPPACh. 12 - Prob. 2SPPACh. 12 - Prob. 3SPPACh. 12 - Prob. 4SPPACh. 12 - Prob. 5SPPACh. 12 - Prob. 6SPPACh. 12 - Prob. 7SPPACh. 12 - Prob. 8SPPACh. 12 - Prob. 9SPPACh. 12 - Prob. 10SPPA
Ch. 12 - Prob. 11SPPACh. 12 - Prob. 1IAPACh. 12 - Prob. 2IAPACh. 12 - Prob. 3IAPACh. 12 - Prob. 4IAPACh. 12 - Prob. 5IAPACh. 12 - Prob. 6IAPACh. 12 - Prob. 7IAPACh. 12 - Prob. 8IAPACh. 12 - Prob. 9IAPACh. 12 - Prob. 1MCQCh. 12 - Prob. 2MCQCh. 12 - Prob. 3MCQCh. 12 - Prob. 4MCQCh. 12 - Prob. 5MCQCh. 12 - Prob. 6MCQCh. 12 - Prob. 7MCQ
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- An insurance company suffers from adverse selection if Select one: a. Safe customers are less likely to insure than risky customers b. Customers know their willingness to pay for insurance but the company does not c. Its customers are risk averse d. Customers take on much greater risk because than insurearrow_forwardShould consumers be concerned with what information is being used?arrow_forwardHow can you help make information more pertinent to your audience and increase your chances of acceptance? Select one: a. Prioritise the information needed and get rid of what is not needed b. Incorporate knowledge management systems c. Be sure all information is ethical d. Send the information to as large an audience as possible e. Send the information through several channelsarrow_forward
- 2. Below is a market for health insurance, with 5 people. Their expected costs, risk premiums, and willingness to pay for insurance are given. The average expected costs are 92. a.Suppose an insurance company offers a premium equal to 92. Determine who will buy and won't buy at that premium (top chart to fill in). Find the insurer's revenue, expenses and profit at that premium (bottom chart to fill in). Then repeat for the higher premiums in periods 2 and 3. Expected Risk Period 1 Willingness Premium to Pay 22 Period 2 Period 3 Costs Premium=$92 Premium=$130 Premium=$180 Person 1 20 2 Person 2 40 5 45 Person 3 80 15 95 Person 4 120 30 150 Person 5 200 60 260 Total 460 Mean 92 Insurer Revenue Insurer Expenses Profit a. Over time, what is happening to the number and type of people in the market for insurance, and what is happening to insurer profits? +arrow_forwardPlease answer fast please arjent help please answer fastarrow_forwardTyped plz and asap Please don't use any AI botarrow_forward
- Adverse selection can occur when a. all persons involved in a transaction have full information one person has information not available to othersarrow_forward1. What is an example of a company that uses a signal to help sell its product. What is the signal? 2. What information is the signal trying to convey? 3. Is the signal effective? Why or why not?arrow_forwardDefine complete informationarrow_forward
- Describe some healthcare situations in which an agent has taken advantage of a principal. Then describe some healthcare transactions that have not taken place because of fears about asymmetric information.arrow_forwardThe part of the policy which may request an insured to submit as a proof of loss is called the A.application B.arbitration C.conditions D.insuring agreementarrow_forwardA side effect of an action that adversely affects is third party is called aarrow_forward
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