Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 30.5, Problem 1ST
To determine
An example of asymmetric information.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Discuss the consequences of asymmetric information for Market Equilibrium.
"Information asymmetry is detrimental for decision-making in the marketplace and hence is a market failure." Provide an example to illustrate this. Then suggest a policy that is used to address this problem.
How does asymmetric information about consumer types affect market outcomes in a scenario where sellers cannot perfectly distinguish between high-value and low-value customers?
Chapter 30 Solutions
Economics (MindTap Course List)
Ch. 30.1 - Prob. 1STCh. 30.1 - Prob. 2STCh. 30.2 - Prob. 1STCh. 30.2 - Prob. 2STCh. 30.2 - Prob. 3STCh. 30.2 - Prob. 4STCh. 30.3 - Prob. 1STCh. 30.3 - Prob. 2STCh. 30.3 - Prob. 3STCh. 30.4 - Prob. 1ST
Ch. 30.4 - Prob. 2STCh. 30.4 - Prob. 3STCh. 30.5 - Prob. 1STCh. 30.5 - Prob. 2STCh. 30.5 - Prob. 3STCh. 30 - Prob. 1QPCh. 30 - Prob. 2QPCh. 30 - Prob. 3QPCh. 30 - Prob. 4QPCh. 30 - Prob. 5QPCh. 30 - Prob. 6QPCh. 30 - Prob. 7QPCh. 30 - Prob. 8QPCh. 30 - Prob. 9QPCh. 30 - Prob. 10QPCh. 30 - Prob. 11QPCh. 30 - Prob. 12QPCh. 30 - Economists sometimes shock noneconomists by...Ch. 30 - Prob. 14QPCh. 30 - Prob. 15QPCh. 30 - Prob. 1WNGCh. 30 - Prob. 2WNGCh. 30 - Prob. 3WNG
Knowledge Booster
Similar questions
- Give an example, real or imaginary, of a moral hazard problem. Again, your example must clearly point out: what information is private/asymmetric (is it an attribute or an action?) which party has the private information when does the information asymmetry arise (before or after the contract/transaction?) what is the likely outcome and in which way it can be inefficientarrow_forwardGive an example, real or imaginary, of an adverse selection problem. Your example must clearly point out: what information is private/asymmetric (is it an attribute or an action?) which party has the private information when does the information asymmetry arise (before or after the contract/transaction?) what is the likely outcome and in which way it can be inefficientarrow_forwardAdverse selection and moral hazard are problems caused by asymmetric information. Explain their difference with reference to real daily examples.arrow_forward
- 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?arrow_forwardHow could a company minimize asymmetric information if they were interested in pricing their stock fairly?arrow_forwardDescribe the two problems arising from asymmetric information, namely: Adverse selection; and Moral hazard.arrow_forward
- How does private information about consumer types impact pricing strategies and market outcomes in the context of asymmetric information in economics?arrow_forwardAsymmetric information makes it hard for investors to sell securities. Banks, meaning both investment and commercial, specialize in reducing asymmetric information. What methods do they have for reducing information asymmetries? Be sure to specify if the methods are designed to reduce the problems of adverse selection or moral hazard.arrow_forwarda) Suppose an insurance company decides to insure the earnings obtained by a professional tennis player (in the event of an injury), provided she does not engage in activities like skydiving or skiing. Which asymmetric information problem is the insurance company trying to avoid? b) How do insurance companies protect themselves against losses due to adverse selection and moral hazard? c) How do insurance companies price their products to solve the problem of asymmetric information?arrow_forward
- In the context of asymmetric information, adverse selection and moral hazard, how does marketFailure occur? (Make reference to the insurance or financial market)arrow_forwardExplain the relationship between moral hazard and insurance premiumsarrow_forwardPick a good and explain how asymmetric or imperfect information could impact the price and confidence of a buyer or seller.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning