ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 14, Problem 7P
A
To determine
The principal-agent problem and to determine who is considered as a principal and in the given relationships
(a) A producer of export of goods and an export management company which helps to market the goods overseas.
Concept Introduction
When a principal hires an agent, to work on his behalf and to represent him in the dealings with the third party, the control will be separated. Then the issues related to principal and agent rises. These issues are known as principal-agent problem
B
To determine
The principal-agent problem and to determine who is considered as a principal and in the given relationship
(b) The management and the stockholders of a firm.
Concept Introduction
When a principal hires an agent, the control will be separated. Then the issues related to principal and agent rises. These issues are known as principal-agent problem
C
To determine
The principal-agent problem and to determine who is considered as a principal and in the given relationship
(c) The owner of the house and the plumber hired for repairs
Concept Introduction
When a principal hires an agent, the control will be separated. Then the issues related to principal and agent rises. These issues are known as principal-agent problem
D
To determine
The principal-agent problem and to determine who is considered as a principal and in the given relationship
(d) A patient and a dentist
Concept Introduction
When a principal hires an agent, the control will be separated. Then the issues related to principal and agent rises. These issues are known as principal-agent problem
E
To determine
The principal-agent problem and to determine who is considered as a principal and in the given relationship
(e) A management firm that manages the pension of the employees and the company that uses its services.
Concept Introduction
When a principal hires an agent, the control will be separated. Then the issues related to principal and agent rises. These issues are known as principal-agent problem
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Difference-in-Difference
In the beginning of 2001, North Dakota legalized fireworks. Suppose you are interested in
studying the effect of the legalizing of fireworks on the number of house fires in North
Dakota. Unlike North Dakota, South Dakota did not legalize fireworks and continued to ban
them. You decide to use a Difference-in-difference (DID) Model. The numbers of house fires
in each state at the end of 2000 and 2001 are as follows:
Number of house fires in Number of house fires in
Year
North Dakota
2000
2001
35
50
South Dakota
54
64
a. What is the change in the outcome for the treatment group between 2000 and 2001?
Show your working for full credit. (10 points)
b. Can we interpret the change in the outcome for the treatment group between 2000
and 2001 as the causal effect of legalizing fireworks on number of house fires?
Explain your answer. (10 points)
C.
Regression Discontinuity
Birth weight is used as a common sign for a newborn's health. In the United States, if a baby
has a birthweight below 1500 grams, the newborn is classified as having “very low birth
weight". Suppose you want to study the effect of having very low birth weight on the number
of hospital visits made before the baby's first birthday. You decide to use Regression
Discontinuity to answer this question. The graph below shows the RD model:
Number of hospital visits made before baby's first birthday
5
1400
1450
1500
1550
1600
Birthweight (in grams)
a. What is the running variable? (5 points)
b. What is the cutoff? (5 points)
T
What is the discontinuity in the graph and how do you interpret it? (10 points)
Chapter 14 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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Similar questions
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