An important and nerve-wracking step in the hiring process is the dreaded interview. Explain the nature of asymmetric information is this setting and employ the ideas of adverse selection and moral hazard to explain why sometimes the process might not bring optimal results. What techniques have to be used to address these problems?

Signals are also used in social settings. In a new place, what signals do you look for to find people who share your interests? Find a product advertisement in a magazine, in a newspaper, or on a Web site, for which the missing information tells you something important about this product. Explain what information is

Do you think companies that issue health insurance should be allowed to inquire about family medical history and the results of genetic testing before deciding to issue insurance policies? Why or why not?  Valentino wants to purchase a classic motorcycle and sees a 1974 Triumph Bonneville T140 listed on Cycletrader.com for $5,950. He is willing to

One-way insurance companies reduce adverse selection problems is by offering group medical coverage to large firms and requiring all employees to participate in the coverage. Explain how this reduces adverse selection.

In the past 15–20 years there have been numerous business/accounting scandals with fraudulent behaviour amounting to billions of dollars. In discussing incentive mechanisms the textbook mentions that the great proportion of CEOs remuneration comes in the form of performance-based bonuses. How would such bonuses explain some CEO’s short-sighted behaviour? 

The five busiest airports in the United States are in Atlanta, Chicago, Los Angeles, Dallas-Ft. Worth, and Denver. At these airports there are more than 450 food outlets, with each airport offering a number of dining options that feature regional cuisines. Passengers will also see many familiar names like McDonald’s, Starbucks, Jamba Juice, Burger King,

The issue of misinformation is news has acquired a greater importance in the age of the Internet. In a 2013 Oxford Internet Survey, traditional media like TV and the radio ranked lower than the Internet in people’s trust when it came to misinformation in news reporting. Using an analogy with the misinformation problem in The

Simon likes to watch movies and his Internet service provider offers streaming movies on a pay-per-view basis for $3 each. The provider also offers a service for unlimited streaming of movies for $15 per month. Simon predicts that he will watch three movies per month, so the value of the movies he would watch is

New PhDs in economics entering the job market find that academic jobs (jobs teaching at colleges and universities) pay about 30 percent less than non-academic jobs such as working at a bank or a consulting firm. Those who take academic jobs are clearly worse off than those who take non-academic jobs. Do you agree? Explain

Great Britain and the United States produce cheddar cheese and blue cheese. Current domestic prices per pound for each type of cheese are given in the following table: Suppose the exchange rate is £1 = $1. a. If the price ratios within each country reflect resource use, which country has a comparative advantage in the