Exam 19: Asymmetric Information

The XYZ Co.sells shirts.Shirts with the company label on the tag are perceived to be of higher quality than shirts with the store's label.Yet,shirts are of identical quality regardless of label.The demand for perceived high-quality shirts is p_h = 50 - q_h.The demand for perceived low-quality shirts is p_l = 10 + p_h - q_l.The firm can produce shirts at TC = q_h + q_l.How many shirts does the firm label as low quality and how many as high quality? What prices are charged?

Two firms,A and B,are faced with a decision on making investments in safety.They each currently earn profit of $500.A safety investment would cost $100 paid by the firm that makes the investment and would lower both firms' labor costs by $75 per firm.If both firms share the investment ($50 each)their labor costs are lowered by $100 per firm.Draw the payoff matrix for this game and determine the Nash equilibrium.Does it make sense for the firms in the industry to ask the government to force them to make the investment? Explain.

Explain why some people who are applying for a job at a bank dress up,arrive early,and have their paperwork neatly completed for the job interview.

Asymmetric information will always cause

Life insurance companies often give applicants a physical examination to prevent

The WWQX Co.sells shirts.Shirts with the company label on the tag are perceived to be of higher quality than shirts with the store's label.Yet,shirts are of identical quality regardless of the label.The demand for perceived high-quality shirts is p_h = 80 - q_h.The demand for perceived low-quality shirts is p_l = 19 + p_h - q_l.The firm can produce shirts at TC = 2q_h + 2q_l.What is WWQX Co.total profit?

In a labor-market pooling equilibrium with high-skill and low-skill workers and where a costly educational degree is used as a signaling device,all else equal,an increase in the wage differential between high- and low-skill workers leads to

The WWQX Co.sells shirts.Shirts with the company label on the tag are perceived to be of higher quality than shirts with the store's label.Yet,shirts are of identical quality regardless of the label.The demand for perceived high-quality shirts is p_h = 80 - q_h.The demand for perceived low-quality shirts is p_l = 19 + p_h - q_l.The firm can produce shirts at TC = 2q_h + 2q_l.How many shirts does the firm label as low quality and how many as high quality? What prices are charged?

If a college degree is used to signal high ability,but the cost of a college degree is relatively high,

Firms are not allowed to ask certain questions during job interviews,including marital status or how many children you have.Why is this the case?

Which of the following is an example of a hidden characteristic?

Auto insurance rates are lower for young women relative to young men.An unusually reckless young woman driver benefits from this

Adverse selection occurs when there is

Suppose 10% of all workers are of high ability.If a firm knows a worker's ability,workers of low ability are paid $20,000 and workers of high ability are paid $30,000.A college degree can signal ability,and the cost of the degree is $11,000.Will there be a pooling equilibrium or a separating equilibrium?

A job advertised in an industry publication rather than a local newspaper is an attempt to

A person who practices poisonous snake charming and does not reveal this to her health insurance company before purchasing insurance is an example of

The requirement that all drivers must carry auto insurance reduces

In the tourist-trap model,a consumer might pay more than the marginal cost for a good sold in a competitive market because

What is one of the most important benefits of the Internet?