With a contributory negligence rule, the injurer has an incentive to take less than the optimal level of precaution because the cost of the harm is shared by the victim proportional to his or her level of responsibility for the accident.O TrueO FalseMoving to another question will save this response.Question 4 of 20 >>>

False Explanation:The assertion is incorrect. The principle of contributory negligence fails to…

Answered: With a contributory negligence rule,…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.7P

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Tyler just wrecked his new Nissan, and the accident was his fault. The owner of the other vehicle got two estimates for the repairs: one was for $803 and the other was for $852. Tyler is thinking of keeping the insurance companies out of the incident to keep his driving record “clean.” Tyler’s deductible on his comprehensive coverage insurance is $500, and he doesnot want his premium to increase because of the accident. In this regard, Tyler estimates that his semi-annual premium will rise by $60 if he files a claim against his insurance company. In view of the above information, Tyler’s initial decision is to write a personal check for $803 payable to the owner of the other vehicle. Did Tyler make the most economical decision?What other options should Tyler have explored? In your answer, be sure to state your assumptions and quantify your thinking.
7. Principal-Agent II A risk-neutral principal can hire a risk-averse agent to undertake a project. There are two possible outcomes for the gross profit of the principal, TL There are also two possible effort levels that the agent can exert, e = 0 or 1; if e = 0, the probability of TH is only 1/3, but if e = 1, the probability of TH increases to 2/3. 20 and TH = 50. The agent's utility from receiving a wage wand exerting effort e is Vw – e, and the agent has a reservation utility of ū = 2. (a) Assume that effort is observable. What wage will the principal offer if she wants to induce low effort? What wage will she offer if she wants to induce high effort? What contract is optimal for the principal?
With a comparative negligence rule (where responsibility for damages is split between the injurer and the victim), both the injurer and victim will take less than the optimal level of care because the expected damages to be paid are less than the expected harm. O True O False Moving to another question will save this response. Question 2 of 20
Mary is an 18-year-old student, who recently bought a used car Mary is looking to buy car insurance Insurance companies compete for her business Is there an adverse selection problems in a transaction between Mary and an insurance company? Why or why not? Adverse selection OA arises because Mary will drive in a careless manner as soon as she has auto insurance OB. does not arise because auto-insurance companies know that 1 year-old girls are better risks than 10-year-old boys OC. is eliminated by auto-insurance companies insuring as many young drivers as possible OD. does not arise because insurance compani OE arises because Mary knows if she is a safe or a risky over reckless insurance company does not know this
information refers to a market where one side (either the buyer or theseller, but usually the buyer) has less information than the other side of themarket. When there is asymmetric information in a market, markets are inefficientbecause the side with less information doesn't want to take the risk involved inbuying (or selling) the good or service.One method of solving this problem is through screening. Screening is a strategyone uses when they don't have information. A screen can be any indicator thatlets the screener know if the good or service is reliable and will meet thescreener's wants.Offer an example of when you used screening to solve a lack ofinformation. What kind of screen did you use?• Was the screen effective? Were you happy with the result?
[Adverse Selection] Each of the two players receives an envelope, in which there is anamount of money that is equally distributed from $0, $1, $2, ..., $100. The amounts in twoenvelopes are independent. After receiving the envelope, each individual can check exactlyhow much money is put in his/her own envelope. Then each player has the option to exchangehis/her envelope for the other individual's prize. The decisions are made simultaneously. Ifboth individuals agree to exchange, then the envelopes are exchanged; otherwise, if at leastone player chooses not to exchange, each individual keeps his/her own envelope and receivesits attached sum of money.a. Model this game as a static Bayesian game (write the normal formrepresentation) and find the Bayesian Nash equilibrium.b. Consider a new game where the probability distribution of money in eachenvelope is changed. The amount is equal to $100 with probability 90%, and is equalto each number in $0, $1, $2, ... ,$99 with probability 0.1%.…
Consider a Variant oF the uitimatum qame we Studicd inclasS in which players have Fairness considerations. The timing OF the qame is vsual. First , Player 1 propasar the split (100 -x, x) XE [0,100]. Player 2 observes split & decides whether to accept (in which case they recieve Moncy according proposed Split) or reject (in Which case they both get žero dollars).But now player i's utility equals to her monetary Vtility minus the disutility From unFairneas proportion al to the diFfrene in Monetary outCOMES . That is, given a final Split (m. ,m.) let OF a hundred dollars to player 2,Where u, (m. ,m.) = m, -B. (m, - m2)* Ui (m.,m.) = m, - P. (m, -m.) Where Pi,Pz are parametens of the game indicating haw strongly Players care a bout Fairness. Noté that the case we Considered corres pands to B, = Bz =0 Let B,=0 7, 10 (a) Which oFFes will player 2.derinitely allept ? revect ? Describe all sequentially rational Strategies For player 2. (b) For cach seqventialy ratianal Strategy of player 2…
mics - ECN-101-D02 -... Bb https://stcc.blackboard.com/webapps/blackboard/exe... CENGAGE MINDTAP Adaptive Test Prep (Ch 01) Question 6: The line CD in the graph below shows that: C 40 30 7- ced 10 20 30 X value 40 O an increase in the values of X increases the values of Y. O X and Y are unrelated. O there is an inverse relationship between X and Y. a decrease in the values of X decreases the values of Y. 10 20 Y value
Table 1 Injurer Victim Care Injurer Care Victim Prob of Accident Care Cost Care Cost WyX, p(x1,x,) None None 15% None Care 12% Care None 10% Care Care 3 2 6% a) Is this a situation of unilateral precaution or bilateral precaution? Assume that the harm caused by each accident (denoted by A in class) is equal to 2. b) Given the information in Table 1, fill in the values in the empty cells of Table 2 Table 2: Injurer care Victim's care Expected harm from Total expected social accident costs p(x,Xu)A None None None Care Care None Care Care
Wayne Enterprises had several salespersons that worked for a contract salary. To encourage them to make more sales, Wayne offered a $5,000 bonus to the salesperson who had the highest total dollar value the following month. That next month, Wendy had the highest sales. When Wendy received her next paycheck, there was no bonus. If Wendy sues Wayne to recover the $5,000 bonus, the likely result will be A. Wendy will lose because she already had a contract so there was no consideration B. Wendy will win because the offer of a bonus for high sales constituted consideration because it entailed additional performance by both parties C. Wendy will lose unless the promise was in writing. D. Wendy will win because of moral consideration
Insurance buyers have more information about whether they are high-risk or low-risk than the insurance company does. This creates an asymmetric information problem for the insurance company because buyers who are high-risk tend to want to buy more insurance, without letting the insurance company know about their higher risk. How might this problem impact an insurance company? F T O The company will not be impacted. O The insurance buyers, not the company, will be impacted. As high risk buyers submit claims, they will use up the company's funds for that year, and since the company did not adjust for these high risk claims, once that money is used up, remaining claimants won't receive any coverage. The company will be faced with heavy losses. The insurance company may decide not to sell insurance in this market at all or otherwise choose not to sell insurance to those they can identify as high risk. 106 # C 4 $ JUL 21 tv♫♬ % MacBook Pro Search or type URL + W D P N Ⓒ
Moving to another question will save this response. Question 8 High litigation costs for the Plaintiff (Victim) and Defendant (Injurer) O A. encourage too little precaution because the Injurers know that the litigation costs will discourage Victims from suing B. encourage too much precaution because the Injurers wish to avoid the high costs of litigation OC. either A or B could be correct OD. None of the above are correct Qu 2 poi

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