Two consequences of asymmetric information are adverse selection and moral hazard. An important distinction between the two is
A) adverse selection exists prior to the completion of a transaction while moral hazard occurs after the transaction is completed.
B) moral hazard exists prior to the completion of a transaction while adverse selection occurs after the transaction is completed.
C) moral hazard leads to an inefficient quantity while adverse selection leads to an efficient quantity.
D) adverse selection leads to an inefficient quantity while moral hazard leads to an efficient quantity.
A
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There is a technological advance in the production of ice cream. As a result, the supply curve of ice cream shifts ________ and ________
A) leftward; both the equilibrium price and equilibrium quantity fall B) rightward; both the equilibrium price and equilibrium quantity fall C) rightward; the equilibrium price falls while the equilibrium quantity increases D) rightward; both the equilibrium price and equilibrium quantity rise
Credibility in threats and commitments in sequential games is based on
a. randomizing one's actions so they are unpredictable b. explicit communications with competitors c. effective scenario planning d. analyzing best reply responses e. none of the above