Question 10 Three roommates Tinker, Evers, and Chance share an apartment. It is really cold outside and they are considering turning up the thermostat in the apartment up by 1, 2, 3, or4 degrees. Their individual marginal benets from making it warmer in the apartment are as follows: 1 degree 2 degrees 3 degrees 4 degrees They know that each time they raise the temperature by one degree, their heating bill goes up by $8. a. Find the marginal social benefit from making it 1, 2, 3, or 4 degrees warmer. b. By how many degrees should they raise the temperature? Question 11 What is meant by asymmetric information in a market? What are two kinds of asymmetric information? Question 12 Explain why 1'bad cars drive out the good ones" in the market for used cars. Question 13 Why does adverse selection occur in the health insurance market? Question 14 How do thirdparty certifications and warranties solve the adverse selection problem in the used car market? Explain your answer. Question 15 Explain the following terms: 0 Principalagentrelationship a Moral hazard Question 16 When do firms pay efficiency wages? What is the relationship between moral hazard and efficiency wages? Question 17 Does the presence of asymmetric information necessarily imply that governments should intervene in a market? Question 18 Explain the potential costs of highpowered incentives by considering the case of providing incentives to police officers. Would it be a good idea to pay higher wages to police officers if they make more arrests? Question 19 Your new car is stolen just days after you buy it. You purchased it for $20,000 but the insurance company believes it is only worth $16,000. a. Why would the insurance company believe it is only worth $16,000? b. Is it worth more than $16,000 to you given your private information on the car