All exercises are available on MyEconLab; appears at the back of this book; problem.
1.1 California provides earthquake insurance. Because the state agency in charge has few staff members, it pays private insurance carriers to handle claims for earthquake damage. These insurance firms receive 9% of each approved claim. Is this compensation scheme likely to lead to opportunistic behavior by insurance companies? Explain. What would be a better way to handle the compensation?
*1.2 Some sellers offer to buy back a good later at some prespecified price. Why would a firm make such a commitment?
1.3 A flyer from one of the world’s largest brokers says, “Most personal investment managers ...