Andrew sees a classified ad from Beth offering a used smartphone for $15. On the opposite page, he sees a big color as from a national electrinics chain offering a new smartphone for $300. Andrew values a smartphone at $335 as long as it works, regardless of whether it is new or used.

For each of the scenarios listed, determine the principle illustrated by each person's reasoning.

Scenario Moral Hazard Adverse Selection

__________________________________________________________________________________________________________________________________________________

Suppose Andrew buys the new smartphone from the national electronics chain,

thinking, "Someone would ask $15 for a used smartphone only if it didn't work well."

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Suppose Beth, the seller of the smartphone, knows the phone works well-she is selling it

only because she got a better model as a gift. She thinks about asking $50 and offering

a guarantee: She will replace the smartphone with a new $300 smartphone if it turns

out not to work. Then she thinks, "That's not a good idea! Someone can just buy it,

handle it carelessly, and, if it breaks, can pretend it didn't work and get a new smartphone

for $50-meanwhile, I would be out $250!"

____________________________________________________________________________________________________________________________________________________

Why is Beth unable to sell Andrew the smartphone? Check all that apply.

A. Adverse selection can cause buyers to avoid purchsing high-quality goods because of the uncertainty about their quality.

B. Moral hazard can prevent sellers from offering guarantees of quality because they can't be sure that buyers won't try to take advantage of the guarantees by filing false claims.

Please: Answer the questions directly and clearly. Often times, people reply with very long answers and it makes it very confusing to understand which are the correct answers. If you can make a chart kind of like the one I made above and if you can put an check mark to say whether it is Moral Hazard or Adverse Selection, that would be apprecited. Or say, for scenario 1 it so and so and for scenario 2 it is so and so. The last question is multiple choice. Please answer clearly whether A or B is correct or both A and B is correct.

According to Villenueva, the source of the wealth that forms the basis of philanthropic funding in the United States would be better thought of as a just reward for effort and ingenuity than theft.

true

false

For Adam Smith, the capacity for the division of labour and thus economic growth was principally dependent on:

The quality of the land.

The wealth of the land-owning class.

The extent of the market.

The concentration of trade in a small number of chartered companies in the colonies.

All of the above.

None of the above.

The importance of e-business for decision making

1. In general, what are some of the tactics the government uses to correct market failures? List 3 and provide a brief explanation of the opportunity costs involved in correcting these failures.

2. Briefly discuss the key difference(s) between Keynesian Economics and Neoclassical Economics.

Emerging business scenario that might require e-business come into actions

In the early months of 2020, many sectors in Hong Kong have been hit hard by the COVID19 outbreak. Investigate how the COVID19 affects the various aspects of the economy, such as Gross Domestic Product (GDP), import and export, economic growth/economic recession, unemployment, and cost of living (inflation/deflation)?

Have the government remedial policies been able to revitalize the economy?

What appropriate policies should be taken to revitalize the economy of Hong Kong if your group were one of the policy-makers in the government leadership?

discuss about Using viral marketing strategy on Wechat

Listed below is information on production for a firm that produces wheat. They can vary the number of workers. The land they use is fixed at one acre. The Wage is $ 20, The land costs $100, The wheat sells for $ 10 per unit.

# of workers | Total product

1...............................20

2................................70

3..............................130

4..............................180

5...............................210

6................................220

7.................................222

3) With 4 workers TOTAL COST is equal to ?

4) With 6 workers TOTAL REVENUE equal to?                   

5)With 7 workers, TOTAL PROFIT is equal to ?

6) If all these workers have the same level of skill, why does worker 6 have a LARGER marginal product than worker 7 ?

7) How many workers should this firm hire to maximize its profits ?

8) If this firm does hire the number of workers you answered for question (7), they will have TOTAL PROFITS equal to ?

9) If all these workers have the same skill level, why does worker 3 have a LARGER MPL than worker 2 ?

10) What is the amount of TOTAL FIXED costs for this firm and for all firms in the SHORT run.?

Comment on whether the price war would likely to end soon. (Base on your knowledge on Cartel and take Russia and OPEC as an example)

Suppose government puts a tax on investment at rate τ. That is, you get only 1 − τ apple tree next period if you invest one apple this period. Derive the investment demand equation (analog of Equation 4.1 in Lecture 5). What would be the effect of this tax on net exports and real exchange rate in an open economy in long run and very-long run? Explain in detail by showing the changes in the relevant markets.

Suppose government put a tax on renting capital so that firms need to pay τ fraction of their capital rental expenses as a tax to government. Drive first-order conditions for capital and labor by solving firm’s maximization problem. What happens in labor, capital and financial markets in short run and long run? Explain in detail by showing the changes in the relevant markets.

i) How might a central bank use monetary financing to allow the government to run up a bigger budget deficit?