Economy and Critical Thinking Essay

1. The purpose of antimonopoly indemnity is to promote __competition among firms_____, which perishs to lower __ charge for customers______. Explain why this is so? The purpose of antitrust policy is to promote competition, which leads to lower prices. If a come with had the power of price control that comes with being a monopoly, they would profit by picking the measurement/price that equals the highest revenue for their company. This would be likely a lower cadence and higher price than would prevail if there was competition. Combining operations could lead to greater efficiency. Cost savings could come by combining HR or accounting depts. The main problem with cost savings is that a monopoly does non squander the pressure to operate efficiently.2. Assume a thinking(a) baseball pitcher is worth $5 trillion per year to his team, compargond to tho $1 million for an unhealthy one. According to a baseball executive, If my assumptions are correct, our team is willing to pay a maximum of $3 million for a pitcher in the free-agent market. What are the executives assumptions? be these assumptions realistic? The executive is assuming that there is asymmetric information show up there about certain pitchers, meaning that the team that is selling the players has more than information on his health than the uninformed buyer, the executive. So a well-founded assumption is that the executive will split the difference in the mixed market and pay the average, which is $3 million. The executive does have realistic assumptions, entirely for the fact that he has asymmetric information, and is not fully notified of the players injury status.3. watery information can go both ways. What are round usages (your own, not from the text) of market situations in which the vender has more information than the buyer and some examples in which the buyer has more information than the seller?One example where the seller knows more than the buyer would be when you are purc hasing a house, the buyer does not know if there are any problems with the basis or roofing or if all the appliances work well or will continue to work well. The seller does know, because they have lived there yen enough to know what is in good shape and what is in speculative shape on the house. An example of the buyer knowing more than the seller is in the antique market, because the buyer may know more score about what they are buying than the seller. The seller may not have put as much time into researching the products.4. Critical Thinking any states, of which I am aware, require automobile owners to insure their vehicle. Yet, studies show that having indemnity actually increases the likelihood of an accident and increases the likelihood of a car / rhythm accident. Discuss why this is so. Who is protected and who is harmed by required automobile damages? The reason that having insurance increases the likelihood of an accident is due to the object lesson act associ ated with car insurance. This is a situation in which one side of an economical relationship takes undesirable or costly actions that the other side cannot observe. For instance, bloody shames car insurance company doesnt know that she now and again texts while driving because they cant physically see her driving.bloody shame does this because she assumes that if anything happens, she is insured and she will be able to financially cover the cost of any accident. It takes the responsibility off of bloody shame (slightly) and puts it on the insurance company which makes Mary act more recklessly. The person driving the vehicle is fairly more protected because of insurance. They are able to financially cover losings to other drivers due to their negligence and risk taking. However, the other drivers on the avenue and the pedestrians that may be out walking are harmed by this added moral hazard because, lets face it, all the insurance in the world wont bring someone back if Mary is t exting and driving and kills them.