A) occurs when incentives are distorted because an individual knows more about his or her own actions than other people do. B) is a term used to describe the bonuses paid for particularly hazardous jobs (such as firefighting). C) is a term used synonymously with "value judgment." D) refers to the questionable morality of price gouging in hazardous times (e.g., in the presence of famines, floods, etc.). A) occurs when incentives are distorted because an individual knows more about his or her own actions than other people do. B) is a term used to describe the bonuses paid for particularly hazardous jobs (such as firefighting). C) is a term used synonymously with "value judgment." D) refers to the questionable morality of price gouging in hazardous times (e.g., in the presence of famines, floods, etc.).

Exam 20: Uncertainty, Risk, and Private Information

Scenario: Used Car Market In the used car market, cars of poor quality are often referred to as "lemons," while cars that are of good quality are considered to be "plums." Suppose the probability of obtaining a lemon is 60% and the probability of obtaining a plum is 40%.Also assume a plum is worth $15,000 and a lemon is worth $3,000. (Scenario: Used Car Market) Look at the scenario Used Car market.In this market, the expected value of a used car would be equal to:

(Multiple Choice)

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Question 21

Moral hazard occurs when:

(Multiple Choice)

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Question 22

Scenario: Choosing Insurance The Ramirez family owns three cars and is considering buying insurance to cover the cost of repairs.They face two possible states: state 1, in which their cars need no repairs and their income available for purchasing other goods and services is equal to $50,000; and state 2, in which their cars need $10,000 worth of repairs and their income available for purchasing other goods and services is reduced to $40,000.The probability of repairs is 10%, while the probability of no repairs is 90%. (Scenario: Choosing Insurance) Refer to the information in the scenario Choosing Insurance.The premium on a fair insurance policy for the Ramirez family will be:

(Multiple Choice)

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Question 23

Consider four individuals: Hank, Babe, Barry, and Willie.Hank's marginal utility of income curve is constant; Babe's marginal utility of income curve is slightly diminishing; Barry's marginal utility of income curve is strongly diminishing; and Willie's marginal utility of income curve is upward sloping.All else equal, which of these individuals will be most risk-averse?

(Multiple Choice)

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Question 24

Moral hazard:

(Multiple Choice)

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Question 25

Given uncertainty, individuals attempt to maximize their:

(Multiple Choice)

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Question 26

Which of the following are likely to be positively correlated?

(Multiple Choice)

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Question 27

Lucy decides to buy car insurance.She is doing this because:

(Multiple Choice)

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Question 28

As a result of frequent flooding, the insurance market has noted a positive correlation between flooding and the amount of insurance monies paid out for such floods.Holding demand for insurance constant, if flooding is expected to continue to be a problem, flood insurance premiums will most likely:

(Multiple Choice)

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Question 29

Risk-averse individuals are willing to make deals that reduce their income but also reduce their risk.False

(True/False)

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Question 30

Assume that flood insurance premiums are determined in the competitive market.Suppose that devastating floods along the Mississippi River have increased the degree of risk aversion among the insurance investors in this market.What will happen to the market for flood insurance policies?

(Multiple Choice)

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Question 31

Adverse selection and moral hazard do not affect the efficiency of the market.True

(True/False)

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Question 32

Rhonda would like to sell her existing digital camera to upgrade to a more sophisticated one by advertising on the bulletin board in the student center.She decides against it because the used digital cameras listed on the board are underpriced.This describes the problem of:

(Multiple Choice)

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Question 33

(Table: Natasha's Total Utility) Look at the table Natasha's Total Utility.Natasha experiences marginal utility as her income increases.The marginal utility of income between $30,000 and $32,500 is utils per dollar, while it is utils per dollar Between $47,500 and $50,000.

(Multiple Choice)

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Question 34

Economic growth that is not industry specific is most likely to:

(Multiple Choice)

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Question 35

The easiest risks to reduce by diversification are those associated with positively correlated events.True

(True/False)

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Question 36

As the premium for an insurance policy falls, there is a(n):

(Multiple Choice)

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Question 37

Newman has decided to take a road trip in a rental car.He has the minimum amount of personal car insurance to legally rent the car, but he decides to pay a little extra to the rental car company to completely insure himself against any damage to the rental car.How is there a potential moral hazard due to Newman's purchase of the additional insurance?

(Essay)

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Question 38

Mary and Bob are trying to decide how much auto insurance to buy.They share the same expectations of an accident, with the same dollar loss.They also have the same income levels.However, Mary would rather buy very little insurance, while Bob would rather buy much more insurance.This suggests that:

(Multiple Choice)

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Question 39

A life insurance company will often require a potential customer to submit to a brief physical exam to assess that person's basic level of health.This practice is a form of to lessen the problem of _.

(Multiple Choice)

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Question 40

Showing 21 - 40 of 199

Moral hazard occurs when:

Moral hazard:

Given uncertainty, individuals attempt to maximize their:

Which of the following are likely to be positively correlated?

Lucy decides to buy car insurance.She is doing this because:

As a result of frequent flooding, the insurance market has noted a positive correlation between flooding and the amount of insurance monies paid out for such floods.Holding demand for insurance constant, if flooding is expected to continue to be a problem, flood insurance premiums will most likely:

Risk-averse individuals are willing to make deals that reduce their income but also reduce their risk.False

Assume that flood insurance premiums are determined in the competitive market.Suppose that devastating floods along the Mississippi River have increased the degree of risk aversion among the insurance investors in this market.What will happen to the market for flood insurance policies?

Adverse selection and moral hazard do not affect the efficiency of the market.True

Rhonda would like to sell her existing digital camera to upgrade to a more sophisticated one by advertising on the bulletin board in the student center.She decides against it because the used digital cameras listed on the board are underpriced.This describes the problem of:

(Table: Natasha's Total Utility) Look at the table Natasha's Total Utility.Natasha experiences marginal utility as her income increases.The marginal utility of income between $30,000 and $32,500 is utils per dollar, while it is utils per dollar Between $47,500 and $50,000.

Economic growth that is not industry specific is most likely to:

The easiest risks to reduce by diversification are those associated with positively correlated events.True

As the premium for an insurance policy falls, there is a(n):

Mary and Bob are trying to decide how much auto insurance to buy.They share the same expectations of an accident, with the same dollar loss.They also have the same income levels.However, Mary would rather buy very little insurance, while Bob would rather buy much more insurance.This suggests that:

A life insurance company will often require a potential customer to submit to a brief physical exam to assess that person's basic level of health.This practice is a form of to lessen the problem of _.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Filters

Exam 20: Uncertainty, Risk, and Private Information

Moral hazard occurs when:

Moral hazard:

Given uncertainty, individuals attempt to maximize their:

Which of the following are likely to be positively correlated?

Lucy decides to buy car insurance.She is doing this because:

As a result of frequent flooding, the insurance market has noted a positive correlation between flooding and the amount of insurance monies paid out for such floods.Holding demand for insurance constant, if flooding is expected to continue to be a problem, flood insurance premiums will most likely:

Risk-averse individuals are willing to make deals that reduce their income but also reduce their risk.False

Assume that flood insurance premiums are determined in the competitive market.Suppose that devastating floods along the Mississippi River have increased the degree of risk aversion among the insurance investors in this market.What will happen to the market for flood insurance policies?

Adverse selection and moral hazard do not affect the efficiency of the market.True

Rhonda would like to sell her existing digital camera to upgrade to a more sophisticated one by advertising on the bulletin board in the student center.She decides against it because the used digital cameras listed on the board are underpriced.This describes the problem of:

(Table: Natasha's Total Utility) Look at the table Natasha's Total Utility.Natasha experiences ________ marginal utility as her income increases.The marginal utility of income between $30,000 and $32,500 is ________ utils per dollar, while it is utils per dollar Between $47,500 and $50,000.

Economic growth that is not industry specific is most likely to:

The easiest risks to reduce by diversification are those associated with positively correlated events.True

As the premium for an insurance policy falls, there is a(n):

Mary and Bob are trying to decide how much auto insurance to buy.They share the same expectations of an accident, with the same dollar loss.They also have the same income levels.However, Mary would rather buy very little insurance, while Bob would rather buy much more insurance.This suggests that:

A life insurance company will often require a potential customer to submit to a brief physical exam to assess that person's basic level of health.This practice is a form of to lessen the problem of _.

First Principles

Economic Models: Trade-Offs and Trade

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Filters

(Table: Natasha's Total Utility) Look at the table Natasha's Total Utility.Natasha experiences marginal utility as her income increases.The marginal utility of income between $30,000 and $32,500 is utils per dollar, while it is utils per dollar Between $47,500 and $50,000.