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Consider the game below (figures in $1000s) between a country's environmental protection agency (EPA) charged with encouraging compliance through (costly) inspections with environmental laws and
Consider the game below (figures in $1000s) between a country's environmental protection agency (EPA) charged with encouraging compliance through (costly) inspections with environmental laws and a chemical manufacturing firm that finds compliance to be costly. Clearly the EPA would prefer not to inspect. But if an inspection discovers noncompliance, the firm is penalized $60, leaving it with a loss of $10. (payoff order: EPA, Chemical manufacturer) Chemical manufacturer comply don't comply EPA inspect 100,0 60,-10 don't inspect 200,0 0,50 This game is an example of Group of answer choices moral hazard. price matching. a Bertrand pricing game. adverse selection
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