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February 12, 2016 

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AGGLOMERATION: The clustering of several similar or related activities at the same location. Many industries have firms that tend to agglomerate, that is, locate very close to one another, leading to geographic concentration. For example, the motion picture industry is concentrated in California, the fashion industry is concentrated in New York, and the petroleum industry is concentrated in Texas. Agglomeration can be caused by accessibility to a concentrated natural resource (such as petroleum or sunny weather), but if often feeds upon itself through agglomeration economies. Firms in the same industry often have lower production cost when the located near their competitors.

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MORAL HAZARD: Moral hazard occurs when a person changes behavior to the detriment of another person, after an agreement has been reached. This is an important information problem with insurance. The problem is that the harmed party does not have information concerning the change in behavior.

     See also | information | insurance | risk | deposit insurance | bank failure | rate of return | government | adverse selection | signalling |


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MORAL HAZARD, AmosWEB GLOSS*arama, http://www.AmosWEB.com, AmosWEB LLC, 2000-2016. [Accessed: February 12, 2016].


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ADVERSE SELECTION

An inefficient, bad, or adverse outcome of a market exchange that results because buyers and/or sellers make decisions based on asymmetric information. This commonly results in a market that exchanges a lesser quality good, what is termed the market for lemons. Two related problems resulting from asymmetric information are moral hazard and the principal-agent problem. Two methods of lessoning the problem of adverse selection are signalling and screening.

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State of the ECONOMY

U.S. Imports
June 2015
$232.4 billion
Up 1.2% from May 2015: Econ. & Stat. Admin.

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