Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information
Asymmetric information is present when there is a difference in access to relevant information. Examples include information differences between (1) a worker and his employer, (2) a buyer and seller, and (3) an insured person and his insurer. The two basic types of problems are (1) moral hazard, which is a problem of hidden actions and ordinarily involves a principal and an agent, and (2) adverse selection, which is a problem of hidden characteristics or "lemons."
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Which of the following will cause an increase in economic growth?
A) a reduction in the unemployment rate B) a reduction in labor force participation C) an increase in human capital D) a reduction in the stock of physical capital
The table above shows a total product schedule. Suppose that labor costs $20 per worker and fixed costs are $60. The total cost of producing 80 units equals
A) less than $5. B) more than $5 and less than $110. C) more than $110 and less than $120. D) more than $120 and less than $150. E) more than $150.
Suppose that a bank with no excess reserves receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum amount that the bank can lend out?
A) $2,000 B) $8,000 C) $10,000 D) $50,000
The federal government receives most of its revenue from three sources: personal income tax, corporate income tax, and payroll tax.
Answer the following statement true (T) or false (F)