Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 15, Problem 2.4P
To determine
Whether the well-known bands are always sold for a lower price than the less well-known bands.
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In the world of French high cuisine, a three-star rating from the Michelin Red Guide is a widely accepted indicator of
gastronomic excellence. French consumers consider Gault Milleau, another restaurant guide, not as authoritative as the
Michelin guide because Gault Milleau, unlike Michelin, accepts advertising and its critics accept free meals.
Why are guides' ratings important to restaurant owners and chefs? Discuss the effect of a restaurant's rating on the
demand for the restaurant.
a.
A) It provides information to consumers regarding the restaurant's quality, thus, reducing the moral hazard problem. A
high rating can increase demand
B)It provides information to consumers regarding the restaurant's quality, thus, reducing the adverse selection problem. A
high rating can increase demand.
b. Why do advertising and free meals taint the credibility of Gault Milleau? Discuss the moral hazard problem of Gault
Milleau's ratings.
A) The critics may be biased toward restaurants that give…
not use ai please
Chapter 15 Solutions
Principles of Economics (12th Edition)
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