Knowledge Assessment Alternative #4 Managerial Economics

Knowledge Assessment Alternative #4 (a) --Managerial Economics
1 What can reduce adverse selection in a market? Explain using an example.
Adverse selection is a type of asymmetric information where the investors cannot distinguish the low risk borrowers from the high-risk borrowers, and this leads to credit rating in the bond markets. Providing information before market transactions is important to improve decision making. One way to address adverse selection is allowing the borrowers to use collateral, and investors also use of credit rationing.
2 What information conditions can eliminate “lemons market” situations? Give an example.
Buyers lack information on products those that are sold in good faith and those that are being sold because they are unreliable/ low quality (lemons), and the low quality can drive out the high quality products. There is a need to increase access to information in industries such as banking, healthcare and the automotive sectors. The buyers have more access to information they would know about the quality of the products. The information should also be about the industry standards, regulation and consumer protection.
3 If you allow employees to access social media during lunch and breaks from their work stations what economic problem may you face? Explain how you would solve the identified economic problem.
There is loss in product...