I. What is moral hazard? List three things an employer might do to reduce the severity of this problem.

2. What is adverse selection? Give an example of a market in which adverse selection might be a problem.

3. Define signaling and screening and give an example of each.

4. What unusual property of voting did Condorcet notice?

5. Explain why majority rule respects the preferences of the median voter rather than the average voter.

6. Describe the ultimatum game. What outcome from this game would conventional economic theory predict? Do experiments confirm this prediction? Explain

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