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(Solved): Morgan sees a Facebook Marketplace post from Dontrelle selling a used weed trimmer for $22. Just to ...



Morgan sees a Facebook Marketplace post from Dontrelle selling a used weed trimmer for $22. Just to the right, Morgan notices a targeted ad from a hardware store chain offering a new weed trimmer for $120. Morgan values a weed trimmer at $135 as long as it works, regardless of whether it is new or used. For each of the scenarios listed, determine the principle illustrated by each person's reasoning. Scenario Moral Hazard Adverse Selection Suppose Morgan buys the new weed trimmer from the national hardware store chain, thinking, “Someone would ask $22 for a used weed trimmer only if it didn't work well.” Suppose Dontrelle, the seller of the weed trimmer, knows the trimmer is in good condition—he is selling it only because he has decided to replace his lawn with a new deck. He thinks about asking $44 and offering a guarantee: He will replace the weed trimmer with a new $120 weed trimmer if it turns out not to work. Then he thinks, “That's not a good idea! Someone can just buy it, handle it carelessly, and, if it breaks, can pretend it didn't work and get a new weed trimmer for $44—meanwhile, I'll be out $76!” Why is Dontrelle unable to sell Morgan the weed trimmer? Check all that apply. Moral hazard can prevent sellers from offering guarantees of quality because they can't



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