a. In the market for used airplanes, explain how adverse selection might arise. What might the buyer or seller do to eliminate adverse selection?

b. Moral Hazard and the Principal-Agent problem. Suppose you own a real estate office that represents buyers and sellers of residential homes. You hire someone to manage the office for you. What moral hazard issues might you encounter? How does this illustrate the Principle-agent problem, and what could you do to partially eliminate the principle-agent problem?

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A A used airplane will have different technical issues and complexities that is only known to the pe... View the full answer