Diversification

If a principle is reducing agency costs by gathering information about the agent's type, he is most likely trying to solve the problem

a. Adverse selection b. Moral hazard c. Both of the above d. None of the above

Suppose that Pat has the legal right to fly an extremely noisy airplane over Chris's apartment and that he values that right at $1,000 per year. Chris would be willing to pay $800 per year to avoid the noise. In this case,

a. Pat will be required to eliminate the overflight b. Chris will move to a new apartment c. Pat and Chris have a powerful incentive to eliminate the overflight because both would benefit from it d. some governmental agency will step in to require Pat to choose a different flight pattern e. there is no basis for an agreement to eliminate the overflight