Question 1

Statistical discrimination using gender and age:

Accepted Answer

A)  is legal in the insurance market, but not the job market.
B)  is legal in the job market, but not the insurance market.
C)  is legal in any market.
D)  is illegal in any market.E) A) and C)
F) A) and D)

Question 2

Information asymmetry becomes a problem when:

Accepted Answer

A)  a buyer and seller have aligned incentives.
B)  a buyer and seller have opposing incentives.
C)  a market is highly efficient.
D)  a market is highly inefficient.E) B) and C)
F) A) and B)

Question 3

Moral hazard:

Accepted Answer

A)  is a normative judgement about the moral choices made by economic agents.
B)  is about actions and occurs after parties have voluntarily entered into an agreement.
C)  is always present when adverse selection arises.
D)  All of these statements are true.E) All of the above
F) C) and D)

Question 4

The government can help solve an information asymmetry problem by:

Accepted Answer

A)  making transactions without complete information illegal.
B)  providing the missing information to the less informed party.
C)  discouraging the more informed party from using the imbalance to their advantage.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 5

A college requiring applicants to submit their high school transcripts is an example of:

Accepted Answer

A)  signaling.
B)  screening.
C)  statistical discrimination.
D)  building a reputation.E) All of the above
F) B) and C)

Question 6

Statistical discrimination:

Accepted Answer

A)  can limit individuals' opportunities simply because they belong to a certain group.
B)  can be a rational response to information asymmetry.
C)  is not always a legal solution to information asymmetry.
D)  All of these are true.E) C) and D)
F) A) and B)

Question 7

Which of the following exemplifies statistical discrimination in health insurance?Insurance providers tend to charge lower premiums to young adults, because young adults cost less on average to insure.People with higher-than-average health costs are more likely to seek out health insurance.Doctors tend to prescribe more tests and treatments to patients who are insured over patients who are uninsured.

Accepted Answer

A)  III only
B)  II and III only
C)  I only
D)  I, II, and IIIE) A) and B)
F) A) and C)

Question 8

People with auto insurance tend to drive less carefully. Economists use this as an example of:

Accepted Answer

A)  adverse selection.
B)  moral hazard.
C)  asymmetric selection.
D)  information optimization.E) A) and B)
F) A) and D)

Question 9

Both screening and signaling:

Accepted Answer

A)  correct inefficiency in the market.
B)  allow more transactions to take place that are valuable to buyers and sellers.
C)  can increase surplus gained in a market.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 10

The nutritional information now available at many fast food restaurants is an example of the government:

Accepted Answer

A)  attempting to control what people eat.
B)  requiring more informed parties to reveal missing information.
C)  screening out unhealthy food for consumers.
D)  requiring restaurants to signal whether food is healthy or not.E) C) and D)
F) All of the above

Question 11

Completing a college degree signals to employers that you are:

Accepted Answer

A)  intelligent.
B)  hardworking.
C)  able to complete assignments.
D)  All of these are signals one gives with a college degree.E) B) and D)
F) All of the above

Question 12

User-feedback scores on eBay are an example of:

Accepted Answer

A)  screening.
B)  statistical discrimination.
C)  building a reputation.
D)  reducing shirking.E) All of the above
F) C) and D)

Question 13

Because the seller of a used car has more information than the buyer, the problem of _____ occurs.

Accepted Answer

A)  moral hazard
B)  information overload
C)  adverse selection
D)  bargaining imbalanceE) A) and B)
F) A) and C)

Question 14

Suppose there is a used car market with 1,000 cars for sale. Buyers know that 500 of the used cars are of poor quality and are worth only $500, while the other 500 used cars are of good quality and are worth $1,500. However, buyers do not know which individual cars are of poor quality or good quality. The seller of a car knows the worth of the car. Which of the following statements is true?In equilibrium, only poor quality cars will be sold.The asymmetric information in this market will cause adverse selection.The equilibrium price of a used car will be $500.

Accepted Answer

A)  I only
B)  I and III only
C)  II and III only
D)  I, II, and IIIE) A) and B)
F) A) and C)

Question 15

Candidates who are trying out for the football team may be required to run a lap around the track. This is an example of:

Accepted Answer

A)  signaling.
B)  screening.
C)  strength building.
D)  training.E) A) and B)
F) B) and D)

Question 16

Because buyers lack information about used cars for sale:

Accepted Answer

A)  buyers will often offer less than what a car is worth, since there is a chance the car is a lemon.
B)  sellers of well-functioning used cars will be more likely to enter the market.
C)  the market will eventually become saturated with high-quality cars.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 17

People _____ have _____ when making choices.

Accepted Answer

A)  often; good enough information
B)  always; enough information
C)  always; access to complete information
D)  never; access to complete informationE) B) and C)
F) None of the above

Question 18

Screening is when someone takes action to:

Accepted Answer

A)  reveal one's own private information.
B)  find out the opportunity cost of acquiring more information.
C)  reveal private information about someone else.
D)  None of these are true.E) None of the above
F) B) and D)

Question 19

Auto insurance providers charge higher premiums to young male drivers, because they tend to be involved in more car accidents than other populations. This is an example of:

Accepted Answer

A)  adverse selection.
B)  signaling.
C)  moral hazard.
D)  statistical discrimination.E) All of the above
F) A) and C)

Question 20

Problems in a market are most likely to arise if:

Accepted Answer

A)  all parties have complete information.
B)  all parties have good enough information to make acceptable choices.
C)  one party involved in a transaction knows more than another party.
D)  all parties involved in a transaction lack the same information.E) A) and B)
F) All of the above

Exam 10: Information

People _ have _ when making choices.

Correct Answer
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The government can help solve an information asymmetry problem by:

Correct Answer
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Moral hazard:

Correct Answer
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Statistical discrimination using gender and age:

Correct Answer
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Correct Answer
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Both screening and signaling:

Correct Answer
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Screening is when someone takes action to:

Correct Answer
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A college requiring applicants to submit their high school transcripts is an example of:

Correct Answer
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Because the seller of a used car has more information than the buyer, the problem of _____ occurs.

Correct Answer
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Candidates who are trying out for the football team may be required to run a lap around the track. This is an example of:

Correct Answer
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User-feedback scores on eBay are an example of:

Correct Answer
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The nutritional information now available at many fast food restaurants is an example of the government:

Correct Answer
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Statistical discrimination:

Correct Answer
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Problems in a market are most likely to arise if:

Correct Answer
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People with auto insurance tend to drive less carefully. Economists use this as an example of:

Correct Answer
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Correct Answer
verified

Completing a college degree signals to employers that you are:

Correct Answer
verified

Because buyers lack information about used cars for sale:

Correct Answer
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Information asymmetry becomes a problem when:

Correct Answer
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Auto insurance providers charge higher premiums to young male drivers, because they tend to be involved in more car accidents than other populations. This is an example of:

Correct Answer
verified

Exam 10: Information

People _____ have _____ when making choices.

Correct AnswerverifiedShow Answer

The government can help solve an information asymmetry problem by:

Correct AnswerverifiedShow Answer

Moral hazard:

Correct AnswerverifiedShow Answer

Statistical discrimination using gender and age:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Both screening and signaling:

Correct AnswerverifiedShow Answer

Screening is when someone takes action to:

Correct AnswerverifiedShow Answer

A college requiring applicants to submit their high school transcripts is an example of:

Correct AnswerverifiedShow Answer

Because the seller of a used car has more information than the buyer, the problem of _____ occurs.

Correct AnswerverifiedShow Answer

Candidates who are trying out for the football team may be required to run a lap around the track. This is an example of:

Correct AnswerverifiedShow Answer

User-feedback scores on eBay are an example of:

Correct AnswerverifiedShow Answer

The nutritional information now available at many fast food restaurants is an example of the government:

Correct AnswerverifiedShow Answer

Statistical discrimination:

Correct AnswerverifiedShow Answer

Problems in a market are most likely to arise if:

Correct AnswerverifiedShow Answer

People with auto insurance tend to drive less carefully. Economists use this as an example of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Completing a college degree signals to employers that you are:

Correct AnswerverifiedShow Answer

Because buyers lack information about used cars for sale:

Correct AnswerverifiedShow Answer

Information asymmetry becomes a problem when:

Correct AnswerverifiedShow Answer

Auto insurance providers charge higher premiums to young male drivers, because they tend to be involved in more car accidents than other populations. This is an example of:

Correct AnswerverifiedShow Answer

People _ have _ when making choices.

Correct Answer
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