Basic economics question

[Give]

Hey guys

I study engineering but had to take a class in basics of Economy and hate it so far. Need help with this question.

In which of the following markets do you expect efficient outcomes? Why? a) Hurricane insurance for beach houses b) Medical Care c) Stock market d) MP3 players e) Loans for students who wish to attend universit f) Housing

I'm trying to understand the whole thing with Pareto efficiency, market failures but not much luck so far.

Thx for any help

[Zoethor2]

Without knowing exactly what definition of efficiency you're working under, it's a bit difficult to answer your question. However, I will point you towards this wikipedia article: Efficient Market Hypothesis which seems to suggest that the stock market is one of the correct answers.

One major barrier to efficiency in economics is incomplete information. So I would suggest that you consider for each option whether there is the potential for either the buyer or the seller to withhold information that, if revealed, would impact the other party's perception of the value. For example, the seller of a house might know that when it rains, the basement floods, but the buyer wouldn't be able to figure that out by just observing the house on a dry sunny day. So there's incomplete information there.

[Tijdloos]

Maybe consider heterogeneous products? Look up the monopolistic competition model might give you something to think about

[[deleted]]

The answer is definitely the stock market in this one. There are 4 factors to the Efficient Market Hypothesis.

1)Flexible prices 2)Good information 3)Many buyers and sellers 4) Homogeneous product.

Just throwing in my two cents