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1. asymmetric infomation
Define asymmetric information. Distinquish between hidden characteristics and hidden actions. Which type of asymmetric information contributes to the principal agent problem?
2. The principal agent problem
Disscuss the nature of the principal agent problem. Determine which is the principal and which is the agent in each of the following relationships:
a. A firm that produces export goods and the export management company that helps market its goods overseas.
b. The management of a firm and its stockholders
c. A homeowner and the plumber hired to make repairs
d. A dentist and a patient
e. An employee pension management firm and the company using its services
3. Adverse selection and moral hazard
Describe the problems faced by health insurance companies as a result of adverse selection and moral hazard. How do insurance companies try to reduce these problems?
If our example patron was a teenager, it's likely the power need that he expressed was a normal teenage reaction to a parent interfering in his life. In additional library visits by his choice, he might reveal himself as achievement motivated. If tha..
Explain the relationship between the Magpie and the Eagle and explain what would be the effect of a 10% increase in the income of the target market have on the demand for the Magpie
Draw the new budget line and use the indifference curve to identify the change in quantity purchased and illustrate the income and substitution effects.
Discuss the potential risks of using Web 2.0 tools. Provide several examples. What are the benefits of "build-to order" to buyers and sellers? Are there any disadvantages?
Determine what type of monetary policy has the Federal Reserve been using for the last year easy or expansionary, tight or contractionary, or neutral or non-involvement)?
How many units of bananas would he consume if he chose the bundle that maximized his utility subject to his budget constraint?
Consider the firms short run decision to hire workers. Suppose that a firm produces goods for sale in the perfectly competitive market. labor markets are competitive as well.
Why does the assumption of independence of risks matter in the examples of insurance? What would happen to premiums if the probabilities of houses burning were positively correlated?
A firm has estimated the following demand function for its product:
What is firm's cost of capital at the various combinations of debt and equity? What is the firm's optimal capital structure? Construct a balance sheet showing that combination of debt and equity financing.
Gentleman Gym just paid its annual dividend of $3 per share, and it is hugely expected that the dividend will raise by five percent per year indefinitely.
Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:
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