Questrom lock Practice Questions

1a. The lack of information on the mortgages led to a moral hazard by the homeowners and led to them in the end defaulting on their mortgages.

1b. I think that we can conclude that this is a mixed economy as the mortgages d by where ran through a comercial bank but later were affected by government intervention.

2a. negative externailty, firms were able to capture value from the rising costs of helping patients with smoking included health conditions. Government could have introduced a tax on cigarretes or provided subsidies to medical insisitutions to decrease costs of helping smoking induced health issues.

2b. Information Assymetry, the lakc of information to consumers led them to unkowingly harm themeslves and cause cancer while in regards to the Gov’t

The innovation leads to destruction fo established firms by making their technooogy and/or business obsolete.