Review_Information___Externalities - FINAL EXAM: 50...

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FINAL EXAM: 50 QUESTIONS= (10 FROM MATERIAL IN TEST 1)+(13 TEST 2)+(13 TEST 3)+(14 FROM CH. 18+19). -For ch.2, pay attention to elasticity/inelasticity -ch.3= pay attention to monopoly, game theory (quite a few questions on theses two things) Review Sheet Information (Ch. 18) and Externalities (Ch. 19) Chapter 18, section 3 Private Information What is adverse selection? - Hidden information and leads to only low quality goods being offered for sale. - Adverse selection occurs when quality of a good is not observable. Only the low quality goods will be offered for sale. What does “the bad drives out the good” mean? Did this happen in the experiment? - It means that when the seller keeps some information about a product “hidden” from the customer, they will not be able to decipher if the product is a high quality or a low quality and this results in the buyer only purchasing low quality goods. - No this didn’t happen in the experiment, but it should have happened. What are the mechanisms sellers use to deal with adverse selection? Were they effective in the experiment, in increasing consumer and overall welfare? -
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Review_Information___Externalities - FINAL EXAM: 50...

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