Two Key Consequences of Asymmetric Information Are Adverse Selection and Moral

question 1

Essay

Two key consequences of asymmetric information are adverse selection and moral hazard.Define each concept,provide one example of each,and explain how the two concepts differ.

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Definitions:

Mixture

A substance made by combining two or more different materials without chemical bonding or other chemical changes, so that each material retains its own properties.

Pounds

A unit of weight commonly used in the United States and the British imperial system, equivalent to 0.453592 kilograms.

Consistent

In the context of systems of equations, a property indicating that the system has at least one solution.

Inconsistent

Describes a system of equations that has no solution because the equations represent parallel lines which never intersect.