Which of the following statements is false? Question 7 options: Asymmetric information can exist both before and after a transaction. Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party. Adverse selection has the potential to eliminate some markets. none of the above

Which of the following statements is false? Question 7 options: Asymmetric information can exist both before and after a transaction. Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party. Adverse selection has the potential to eliminate some markets. none of the above

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 7MC

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Similar questions

An advertisement in the local paper offers a "fully loaded" car that is only six months old and has only been driven 5,000 miles at a price that is 20 percent lower than the average selling price of a brand new car with the same options. This low price is likely indicative of what type of situation? a) Adverse selection b)Moral hazard c) Winner's curse d) Perfect information
Which of the following is an example of moral hazard? Group of answer choices High-quality products being driven out of a market by low-quality products. A local charity raising insufficient funds because no one contributes, expecting that their neighbors will. A bakery defaults on its loan because of a new consumer fear of carbohydrates. A corporation uses a business loan secured for one investment on another, higher-risk investment. All of the above.
If you sell your DVD player on eBay you will be better informed about the quality of the product than any potential buyer. This is called A) adverse selection. B) asymmetric information. C) moral hazard. D) opportunistic behavior.
Differentiate between adverse selection and moral hazard problems with one examples
Which of the following is an example of adverse selection? Group of answer choices A safe driver taking greater risk in a rental car than his own car. A risk averse driver buying car insurance. An company offering incentive sharing contracts to employees.mployees. McDonald's selling franchises for a flat fee. None of the above.
Which of the following would not be an example of a problem associated with moral hazard? Group of answer choices party taking an unobservable action to gain pense of another party. A traveler leaving his valuables in sight in a hotel room because she has travel insurance. A salesman ordering an expensive meal on a business trip because his company pays his expenses. All of the above are examples of moral hazard.
give an example of an existing economic interaction that exhibits moral hazard. describe the setting and talk about efficiency considerations.
Which is not an example of asymmetric information? Group of answer choices A customer not knowing which insurance plan is best A client making a purchase of a used private airplane of unknown condition A mail carrier making her deliveries An insurer not having the full information about a client’s drug use A tree service recommending needless pruning on fruit trees is an example of: Group of answer choices adverse selection. mutually beneficial trades. moral hazard. a trade fallacy.
Question 3 Which of the following statements is NOT correct? Question 3 options: Asymmetric information may lead to the disappearance of a market. Information plays an important role in the economy. There are no solutions to reduce the impact of adverse selection. It is always desirable to have more information than the person one is trading with.
Adverse selection occurs because of A) spreading of risks. B) diminishing marginal utility. C) of imperfect information. D) moral hazard
Distinguish between adverse selection and moral hazard as they relate to the insurance industry.
Which of the following statements is NOT correct? Question 3 options: Asymmetric information may lead to the disappearance of a market. Information plays an important role in the economy. There are no solutions to reduce the impact of adverse selection. It is always desirable to have more information than the person one is trading with.