Exam 14: Transaction Costs, Imperfect Information, and Behavioral Economics

Exhibit 14-3 Jira is searching for a big screen television.Exhibit 14-3 shows her marginal cost and marginal benefit from searching for the television.How many minutes should she search?

Exhibit 14-2 In Exhibit 14-2, the point I₁ indicates

Signaling is the attempt by the uninformed side of the market to uncover the relevant but hidden characteristics of the informed party.

An employer-employee relationship is

The principal-agent problem arises because of

Moral hazard occurs when a person's behavior changes in a way that

A horizontally integrated firm produces products in a variety of industries (e.g., General Electric, which produces jet engines, air conditioners and microwave ovens).

Personal dating advertisements in the newspaper are popular because they

If a seller knows more about the good than the buyer does, there exists

An example of a moral hazard would be Andrew leaving the washer, dryer, and dishwasher running at home while he goes to class since he is fully insured and he will not be at risk if a fire occurs.

Suppose the new doctor you found in the yellow pages turns out to be a charlatan.This is an example of

Suppose a company that produces furniture wax branches out into producing a dusting product like Lemon-Dust-Away.If this expansion is efficient, the company must

If a firm experiences economies of scope,

The simpler a production process is,

If a firm that experiences economies of scope doubles its production of an item, its costs will less than double.

The publisher that paid Arthur Arthur, the popular novelist, a $2 million advance on his recent novel, which sold only 42 copies, fell victim to

For which of the following goods is the marginal benefit of search likely to be greatest?

Firms emerge when transaction costs of using the market are less than the cost of hierarchical control.

One result of asymmetric information in the market for used cars is that few lemons are sold.

Spacely Sprockets, Inc., usually pays $1, 000 for a million flanges, which it uses as inputs in the manufacture of sprockets.It also spends an average of $20 per million flanges on finding manufacturers and negotiating contracts.Spacely is capable of making its own flanges at a cost of $980 per million.Given these costs,