Question

Rio and Mei are both applying for a job with PWCQ. Both are very intelligent and are more than capable of doing the job. However, Rio has an honours degree from the University of Queensland and Mei has an online degree from a small, relatively unknown university. Select the item from the list provided to make the following statements true. 1. Adverse selection 2. 20% 3. Asymmetric information Rio's UQ degree communicates that she is an intelligent, capable future employee. This is an example of As an employer, PWCQ must rely on such signals as a result of Marginal benefit 5. Principal-agent problem The managers of PWCQ decide to refurbish their offices even though this costs 6. Expected value the company a considerable amount of money. This is an instance of -. 7. 8096 8. Costly to fake principle 9 More time looking 10. Moral hazard 11. Marginal cost 12. Less time looking

Answer 1

(1) Rio's degree communicates she is capable future employee, is example of Adverse selection.

(2) As employer, PWCQ must rely on such signals as result of information asymmetry.

(3) Managers decide to refurbish offices, is instance of Principal-agent problem.