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1. Adverse selection vs moral hazard Gilberto sees a classified ad from Juanita offering a used DVD player for $20. On the opposite page, he sees a big color ad from a national electronics chain offering a new DVD player for $175. Gilberto values a DVD player at $ 205 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. Moral Adverse Scenario Hazard Selection Suppose Gilberto buys the new DVD player from the national electronics chain, thinking "Someone would ask $20 for a used DVD player only if it didn't work well." O Suppose Juanita, the seller of the DVD player, knows the player works well- she is selling it only because she got a better model as a gift. She thinks about asking $45 and offering a guarantee: She will replace the DVD player with a new $175 DVD player if it turns out not to work. Then she thinks, "That's not a good idea! Someone can just buy it, handle it O carelessly, and, if it breaks, can pretend it didn't work and get a new DVD player for $45-meanwhile, I'll be out $130!" Why is Juanita unable to sell Gilberto the DVD player? Check all that apply. Adverse selection can cause buyers to avoid purchasing high-quality goods because of uncertainty about their quality. 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