Question 1

User-feedback scores on eBay are an example of:

Accepted Answer

A)  screening.
B)  statistical discrimination.
C)  building a reputation.
D)  None of these statements is true.E) All of the above
F) B) and D)

Question 2

The government can help solve the information asymmetry problem by:

Accepted Answer

A)  telling less-informed parties not to participate in the market.
B)  excluding those who do not have complete information from the market.
C)  making markets where information asymmetry is significant illegal.
D)  requiring the more informed party to reveal the missing information.E) B) and D)
F) B) and C)

Question 3

The principal-agent problem is:

Accepted Answer

A)  when the principal has less information than the agent.
B)  when the principal has more information than the agent.
C)  when the agent has less information than the principal.
D)  not observed in reality.E) B) and C)
F) A) and C)

Question 4

An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:

Accepted Answer

A)  statistical discrimination.
B)  mandating that information be shared.
C)  proofing.
D)  All of these are ways to solve information asymmetry.E) A) and D)
F) A) and B)

Question 5

Moral hazard can be avoided by:

Accepted Answer

A)  employers monitoring employee effort.
B)  removing the asymmetric information.
C)  employers incentivizing employees to maintain consistent effort.
D)  All of these statements are true.E) C) and D)
F) B) and C)

Question 6

Consumer Reports' reviews of products are an example of:

Accepted Answer

A)  Statistical discrimination.
B)  signaling.
C)  statistical reputations.
D)  None of these statements is true.E) A) and B)
F) A) and C)

Question 7

Adverse selection is a problem that arises:

Accepted Answer

A)  before the parties have entered into an agreement.
B)  after the parties have voluntarily entered into an agreement.
C)  either before or after the parties have entered into an agreement.
D)  rarely in any market.E) A) and D)
F) A) and C)

Question 8

Statistical discrimination:

Accepted Answer

A)  can limit the opportunities of individuals just because they happen to belong to a certain group of people.
B)  is an irrational response to information asymmetry.
C)  is always a legal solution to information asymmetry.
D)  All of these statements are true.E) None of the above
F) B) and C)

Question 9

One way to solve the principal-agent problem would be to have:

Accepted Answer

A)  the employer constantly monitor the employee's efforts.
B)  the employee constantly monitor the employer's activities.
C)  the employer share all management choices with employees before making decisions.
D)  the employee sign a waiver of release.E) C) and D)
F) A) and C)

Question 10

What's the opportunity cost of taking an unfair advantage in a deal?

Accepted Answer

A)  Probably nothing,if the transaction is only taking place once.
B)  Building a reputation for being untrustworthy if the deal is likely to be repeated.
C)  Future deals may not occur or may come at a much higher cost.
D)  All of these statements are true.E) A) and D)
F) A) and C)

Question 11

An employer asking potential employees to interview with them is an example of:

Accepted Answer

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

Question 12

Some people make purchases without complete information because:

Accepted Answer

A)  they are irrational.
B)  the opportunity cost of getting more information outweighs the benefit of having more information.
C)  the benefit of having more information outweighs the cost of acquiring it.
D)  No one makes purchases without complete information.E) A) and D)
F) A) and C)

Question 13

A way in which government can attempt to solve the problems caused by information asymmetry in the marketplace is:

Accepted Answer

A)  statistical discrimination.
B)  screening.
C)  disclosure laws.
D)  building a reputation.E) A) and B)
F) A) and C)

Question 14

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 high school degree.E) A) and C)
F) None of the above

Question 15

Building a good reputation:

Accepted Answer

A)  is a form of screening.
B)  is a form of signaling.
C)  is a form of statistical discrimination.
D)  None of these statements is true.E) A) and B)
F) A) and C)

Question 16

Reading a Consumer Reports review of a vacuum cleaner before buying is the same way of dealing with information asymmetry as:

Accepted Answer

A)  a certification of a used car from a brand dealership.
B)  an employer requiring a drug test.
C)  an insurance company offering different deductible-level plans.
D)  a college charging a high tuition relative to other schools.E) A) and B)
F) B) and D)

Question 17

Moral hazard is:

Accepted Answer

A)  the tendency for people to behave in a riskier way when they're insured.
B)  when individuals make exchanges in the grey market.
C)  when one party acts in a way that is ethically outside the norm in a market exchange.
D)  when both parties act in a way that is ethically outside the norm in a market exchange.E) All of the above
F) A) and D)

Question 18

Risky transactions are those in which:

Accepted Answer

A)  complete information is not possible to obtain.
B)  there is an imbalance of information between buyer and seller.
C)  one party to a transaction uses the other party's lack of information to their advantage.
D)  one party withholds information from the other party and uses that to his advantage.E) B) and C)
F) A) and D)

Question 19

A job candidate refusing to take a drug test for a potential employer is an example of:

Accepted Answer

A)  signaling.
B)  screening.
C)  building a reputation.
D)  principles-based behavior.E) B) and D)
F) None of the above

Question 20

Moral hazard:

Accepted Answer

A)  is about unrelated characteristics of people.
B)  is about the actions of people.
C)  occurs before the parties have entered into an agreement.
D)  None of these statements is true.E) A) and C)
F) All of the above

Exam 10: Information

An employer asking potential employees to interview with them is an example of:

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What's the opportunity cost of taking an unfair advantage in a deal?

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Consumer Reports' reviews of products are an example of:

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An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:

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One way to solve the principal-agent problem would be to have:

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Risky transactions are those in which:

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Statistical discrimination:

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Moral hazard is:

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A job candidate refusing to take a drug test for a potential employer is an example of:

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Moral hazard:

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A way in which government can attempt to solve the problems caused by information asymmetry in the marketplace is:

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The government can help solve the information asymmetry problem by:

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Some people make purchases without complete information because:

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Moral hazard can be avoided by:

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Adverse selection is a problem that arises:

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The principal-agent problem is:

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Building a good reputation:

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User-feedback scores on eBay are an example of:

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Completing a college degree signals to employers that you are:

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Reading a Consumer Reports review of a vacuum cleaner before buying is the same way of dealing with information asymmetry as:

Correct AnswerverifiedShow Answer

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