(Solved by Humans)-11. (Bounds of the Firm) Ashland Oil, Inc., buys its crude oil in

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11. (Bounds of the Firm) Ashland Oil, Inc., buys its crude oil in the market. Larger oil refiners, such as Texaco, drill for their own crude oil. Why do some oil companies drill for their own crude oil and others buy crude oil in the market?
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12. (Economies of Scope) Distinguish between economies of scale and economies of scope. Why do some firms produce multiple product lines, while others produce only one?
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13. (Asymmetric Information) Define asymmetric information. Distinguish between hidden characteristics and hidden actions. Which type of asymmetric information contributes to the principal-agent problem?
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14. (The Principal-Agent Problem) Discuss the nature of the principal-agent problem. Determine which is the principal and which is the agent in each of the following relationships:
a. A firm that produces export goods and the export management company that helps market its goods overseas
b. The management of a firm and its stockholders
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15. (Adverse Selection and Moral Hazard) Describe the problems faced by health insurance companies as a result of adverse selection and moral hazard. How do insurance companies try to reduce these problems?

16. (Signaling) Give an example of signaling in each of the following situations.
a. Choosing a doctor
b. Applying to graduate school