Question

Angelo is looking to take a trip overseas. His mother, Maria, suggests that he go to a travel agent because they are "experts" in the field and will be able to get him the best deal. Select the item from the list provided to make the following statements true. 1. Adverse selection 2. 20% 3. Asymmetric information The existence of travel agents is a result of With the creation of the internet, Angelo could search 4. Marginal benefit online instead of visiting different travel agents. This5. Principal-agent problem process is likely to have a lower_ 6. Expected value Angelo instead decides to search using the internet He should search until his marginal cost equals the expected value of his 8. Costly to fake principle 9. More time looking 10. Moral hazard 1. Marginal cost 12. Less time looking

Answer 1

1) The existence of travel agent is a result of Asymmetric Information

i) Asymmetric information s one when there is gap in knowledge. in the all information of seller does not reach to the buyer and vice versa . thus , the travel agents fill this gap

2) With the creation of the interest , Angelo could search online instead of visiting different travel agents .this process is likely have lower marginal cost .

i) through internet he can collect the information on his own thus he will be informed so helpful in decision making process

3) Marginal benefit. she will be selecting the alternative according to her requirement.

As well as she will select alternative which will be cost effective .

2) Before making any decision he should collect more information from the market.

only after collecting of the information make a better decision