Exam 14: Transaction Costs, Imperfect Information, and Behavioral Economics

Which of the following may result when workers have much better information about their own productivities than employers have?

The law firm of Cheep, Cheeper, and Cheeperstill offers a salary of $35, 000 to first-year lawyers.This firm will attract applications from

If we assume perfect information, perfect mobility of resources, and no transactions costs, then there is little need for firms.

According to Coase, firms emerge when

Suppose Sally buys a Volvo because they are safe and, as a result, drives faster and pays less attention to other cars on the road.This is an example of

Universities sometimes hire professors who are poor teachers but have good research skills because

Exhibit 14-2 In Exhibit 14-2, the optimal level of search is

A principal-agent problem arises when

The more complicated the process used to produce a good,

Don's Pasture Apple Cider Company buys four inputs: apples, glass bottles, apple presses, and computers for record keeping.If the company decides to become more vertically integrated, it will

The used car market may be inefficient because the purchase of a used car often involves

If the minimum efficient scale in aluminum production exceeds the quantity of aluminum any individual aluminum siding producer buys,

A signal works best if

When a firm is operating at its minimum efficient scale, its

By integrating vertically,

Screening is the attempt by the uninformed side of the market to uncover the relevant but hidden characteristics of the informed party.

Exhibit 14-3 In Exhibit 14-3, if Jira gathers an amount of information equal to 15 minutes,

Employers rely on a job applicant's signals

Lemon laws are an attempt to reduce __________ in used car markets.

Exhibit 14-3 In Exhibit 14-3, the point where the marginal cost of information is 0 and the amount of information is 5 minutes worth is