1 Learning Outcomes
1. Explain the notion of adverse selection for buyers.
2. Discuss the possible responses to adverse selection for buyers.
3. Explain the notion of moral hazard.
4. Define a public good and the free rider problem.
5. Use the marginal principle to describe the optimum level of pollution.
11.2 Action Required:
Reading
Read the following to prepare for this week:
· Survey of Economics, Chapter 9: Imperfect Information, External Benefits, and External Costs
Video:
Watch the following video(s), which you can access in the Weekly Media object or by clicking on the link(s) below: and answer the question.
MIT Open CourseWare video lecture series, “Uncertainty” http://www.youtube.com/watch?v=f8Kn9GkR514&list=SP61533C166E8B0028&index=21
11.3 Test your Knowledge (Question):
Q1: Discuss how asymmetric information present in second hand car market, often leads to adverse selection for buyers.
11.4 Instructions
Answer the question in test your knowledge section.
Post your answer in the discussion board
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