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...Dirk bergemann department of economics yale university b intermediate microeconomics final exam suggested solutions both moral hazard and adverse selection are products asymmetric in formation where one or more the parties transaction involved do not possess some relevant information that other refers to hidden actions while example discussed class demonstrating was chef who could produce a high low quality meal at cost respectively but patrons observe until after purchasing it giving him incentive for is car dealer knows value be sold buyer does due uncertainty about always make trade even when would benet so constrainedoptimizationisaproblemwhereapartydesirestominimizeor maximizesomeobjectivefunction must satisfy constraints doing classic constrained optimization maximizing utility subject budget constraint max u x s t p i first order conditions mark points which derivative objec tive function with respect each control variable zero an unconstrained problem these potential however in...