Ahmet sees a Facebook Marketplace post from Trinity selling a used weed trimmer for $20. Just...

 

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Ahmet sees a Facebook Marketplace post from Trinity selling a used weed trimmer for $20. Just to the right, Ahmet notices a targeted ad from a hardware store chain offering a new weed trimmer for $220. Ahmet values a weed trimmer at $260 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 Suppose Ahmet buys the new weed trimmer from the national hardware store chain, thinking, "Someone would ask $20 for a used weed trimmer only if it didn't work well." Suppose Trinity, the seller of the weed trimmer, knows the trimmer is in good condition-she is selling it only because she has decided to replace her lawn with a new deck. She thinks about asking $48 and offering a guarantee: She will replace the weed trimmer with a new $220 weed trimmer if it turns out not to work. Then she 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 $48-meanwhile, I'll be out $1721" Why is Trinity unable to sell Ahmet the weed trimmer? Check all that apply. Moral Hazard Adverse Selection A Moral hazard can prevent sellers from offering guarantees of quality because they can't be sure that buyers won't try to take advantage of the guarantees by filing false claims. Adverse selection can cause buyers to avoid purchasing high-quality goods because of the uncertainty about their quality. Ahmet sees a Facebook Marketplace post from Trinity selling a used weed trimmer for $20. Just to the right, Ahmet notices a targeted ad from a hardware store chain offering a new weed trimmer for $220. Ahmet values a weed trimmer at $260 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 Suppose Ahmet buys the new weed trimmer from the national hardware store chain, thinking, "Someone would ask $20 for a used weed trimmer only if it didn't work well." Suppose Trinity, the seller of the weed trimmer, knows the trimmer is in good condition-she is selling it only because she has decided to replace her lawn with a new deck. She thinks about asking $48 and offering a guarantee: She will replace the weed trimmer with a new $220 weed trimmer if it turns out not to work. Then she 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 $48-meanwhile, I'll be out $1721" Why is Trinity unable to sell Ahmet the weed trimmer? Check all that apply. Moral Hazard Adverse Selection A Moral hazard can prevent sellers from offering guarantees of quality because they can't be sure that buyers won't try to take advantage of the guarantees by filing false claims. Adverse selection can cause buyers to avoid purchasing high-quality goods because of the uncertainty about their quality.