Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 17, Problem 3E
To determine
The banning of lower grades and the moral hazard.
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Someone indicated that employee’s absence from work despite meeting the eight hours per day requirement affect productivity and increase cost of business. If an employee makes up the hours by coming early and leaving late, how can you call it an example of moral hazard when the manager can easily correct this behavior? Please explain to the class.
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.
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
Chapter 17 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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Similar questions
- give an example of an existing economic interaction that exhibits moral hazard. describe the setting and talk about efficiency considerations.arrow_forwardWhat is moral hazard?arrow_forwardAdverse selection occurs because of A) spreading of risks. B) diminishing marginal utility. C) of imperfect information. D) moral hazardarrow_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_forwardIf people get higher pay for insurance than their premium will this increase or decrease the death rate of average persons? Is this an example of a moral hazard or harvest selection. How will an insurance company deal with this problemarrow_forwardYou have just received a report suggesting that a chemical your company uses in its manufacturing process is very dangerous. You have not read the report, but you are generally aware of its contents. You believe that the chemical can be replaced fairly easily but that if word gets out, panic may set in among employees and community members. A reporter asks if you have seen the report, and you say no. Is your behavior right or wrong? Explain.arrow_forward
- 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.arrow_forwardProvide an example of Moral Hazard from personal observation or experience.arrow_forwardIf people get higher pay from insurance than their premiums. Will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse seletion? How will an insurance company deal with these problems?arrow_forward
- What would explain why moral hazard might not occur after the large gains in health insurance coverage?arrow_forwardIn the context of asymmetric information, adverse selection and moral hazard, how does marketFailure occur? (Make reference to the insurance or financial market)arrow_forwardDifferentiate between adverse selection and moral hazard problems with one examplesarrow_forward
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