Question 1

A well-known brand name associated with high quality:

Accepted Answer

A) is of value to consumers. 
B) can take a long time to establish. 
C) can be costly to maintain. 
D) All of these are true. 
A) is of value to consumers. 
B) can take a long time to establish. 
C) can be costly to maintain. 
D) All of these are true. D

Question 2

An auto insurance company offering discounts to students with high grades in school an example of:

Accepted Answer

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

Question 3

Which of the following is a classic example of adverse selection?

Accepted Answer

A) People who have health insurance taking poor care of their health. 
B) Workers who put in less effort when their effort isn't closely monitored. 
C) The imbalance of information that exists between used car buyers and sellers. 
D) Drivers with insurance who tend to drive more recklessly. 
A) People who have health insurance taking poor care of their health. 
B) Workers who put in less effort when their effort isn't closely monitored. 
C) The imbalance of information that exists between used car buyers and sellers. 
D) Drivers with insurance who tend to drive more recklessly. C

Question 4

User reviews of a product on the manufacturer's website reassure buyers of the product's quality. This is an example of:

Accepted Answer

A) screening. 
B) building a reputation. 
C) statistical discrimination. 
D) researching. 
A) screening. 
B) building a reputation. 
C) statistical discrimination. 
D) researching.

Question 5

What is one way to avoid the principal-agent problem in the workplace?

Accepted Answer

A) The employee constantly monitors the employer's activities. 
B) The employer constantly monitors the employee's efforts. 
C) The employer shares all management choices with employees before making decisions. 
D) The employee signs a waiver of release. 
A) The employee constantly monitors the employer's activities. 
B) The employer constantly monitors the employee's efforts. 
C) The employer shares all management choices with employees before making decisions. 
D) The employee signs a waiver of release.

Question 6

Which of the following is one way employers can minimize moral hazard?

Accepted Answer

A) Monitor employees' computer activity 
B) Offer bonuses for consistent productivity 
C) Set up video cameras in the workplace 
D) All of these are ways to minimize moral hazard. 
A) Monitor employees' computer activity 
B) Offer bonuses for consistent productivity 
C) Set up video cameras in the workplace 
D) All of these are ways to minimize moral hazard.

Question 7

Taking action to reveal one's own private information is called:

Accepted Answer

A) screening. 
B) signaling. 
C) statistical discrimination. 
D) proofing. 
A) screening. 
B) signaling. 
C) statistical discrimination. 
D) proofing.

Question 8

Moral hazard _____ when adverse selection is a problem.

Accepted Answer

A) always occurs 
B) never occurs 
C) can occur 
D) Moral hazard is not related to adverse selection. 
A) always occurs 
B) never occurs 
C) can occur 
D) Moral hazard is not related to adverse selection.

Question 9

Governments can use public regulation to help solve information asymmetry problems by:

Accepted Answer

A) mandating participation in a market or program. 
B) making screening illegal. 
C) mandating that employers build a reputation before screening. 
D) All of these are true. 
A) mandating participation in a market or program. 
B) making screening illegal. 
C) mandating that employers build a reputation before screening. 
D) All of these are true.

Question 10

Individuals with an expensive pre-existing condition are more likely to purchase health insurance, which exemplifies _____. Individuals who have health insurance visit the doctor more frequently than individuals who are uninsured, which exemplifies _____.

Accepted Answer

A) moral hazard; adverse selection 
B) adverse selection; moral hazard 
C) statistical discrimination; adverse selection 
D) adverse selection; the principal-agent problem 
A) moral hazard; adverse selection 
B) adverse selection; moral hazard 
C) statistical discrimination; adverse selection 
D) adverse selection; the principal-agent problem

Question 11

Adverse selection is a problem that arises _____ the parties have entered into an agreement.

Accepted Answer

A) before 
B) after 
C) either before or after 
D) Adverse selection is not related to an agreement between parties. 
A) before 
B) after 
C) either before or after 
D) Adverse selection is not related to an agreement between parties.

Question 12

Disclosure laws:

Accepted Answer

A) are an example of how the government attempts to assert control. 
B) always help solve information asymmetry, but can cause other problems. 
C) can result in information overload. 
D) All of these are true. 
A) are an example of how the government attempts to assert control. 
B) always help solve information asymmetry, but can cause other problems. 
C) can result in information overload. 
D) All of these are true.

Question 13

The "private" information revealed during screening typically refers to information that is:

Accepted Answer

A) personal. 
B) embarrassing. 
C) not public. 
D) hidden for a reason. 
A) personal. 
B) embarrassing. 
C) not public. 
D) hidden for a reason.

Question 14

The government requires that every driver have some form of car insurance to address the problem of:

Accepted Answer

A) moral hazard. 
B) illegal screening. 
C) adverse selection. 
D) statistical discrimination. 
A) moral hazard. 
B) illegal screening. 
C) adverse selection. 
D) statistical discrimination.

Question 15

Adverse selection:

Accepted Answer

A) relates to actions and occurs after parties have voluntarily entered into an agreement. 
B) is always present when moral hazard arises. 
C) relates to unobserved characteristics of people or goods and occurs before parties have entered into an agreement. 
D) All of these statements are true. 
A) relates to actions and occurs after parties have voluntarily entered into an agreement. 
B) is always present when moral hazard arises. 
C) relates to unobserved characteristics of people or goods and occurs before parties have entered into an agreement. 
D) All of these statements are true.

Question 16

Job candidates will seek to provide potential employers with _____ while avoiding _____.

Accepted Answer

A) positive signals; negative signals 
B) as much information as possible; private information 
C) positive signals; private information 
D) truthful information; false information 
A) positive signals; negative signals 
B) as much information as possible; private information 
C) positive signals; private information 
D) truthful information; false information

Question 17

In order for a college degree to be effective as a signal of worker productivity:

Accepted Answer

A) it must be easy for everyone to get a college degree. 
B) it must be costly for low productivity workers to get a college degree. 
C) potential employers must understand the principal-agent problem. 
D) it must completely eliminate moral hazard. 
A) it must be easy for everyone to get a college degree. 
B) it must be costly for low productivity workers to get a college degree. 
C) potential employers must understand the principal-agent problem. 
D) it must completely eliminate moral hazard.

Question 18

Filling gaps in your information by generalizing based on observable characteristics is called:

Accepted Answer

A) statistical discrimination. 
B) signaling. 
C) building a reputation. 
D) proofing. 
A) statistical discrimination. 
B) signaling. 
C) building a reputation. 
D) proofing.

Question 19

Statistical discrimination is sometimes:

Accepted Answer

A) illegal. 
B) unethical. 
C) not useful. 
D) All of these are true. 
A) illegal. 
B) unethical. 
C) not useful. 
D) All of these are true.

Question 20

When you are considering a decision but lack full information, you should:

Accepted Answer

A) obtain more information only if the benefit of the information is greater than the opportunity cost of getting it. 
B) always seek out the most information you can before making a decision. 
C) not make the decision without complete information. 
D) obtain more information if there is any benefit at all to getting the information. 
A) obtain more information only if the benefit of the information is greater than the opportunity cost of getting it. 
B) always seek out the most information you can before making a decision. 
C) not make the decision without complete information. 
D) obtain more information if there is any benefit at all to getting the information.

Exam 10: Information

A well-known brand name associated with high quality:

An auto insurance company offering discounts to students with high grades in school an example of:

Which of the following is a classic example of adverse selection?

User reviews of a product on the manufacturer's website reassure buyers of the product's quality. This is an example of:

What is one way to avoid the principal-agent problem in the workplace?

Which of the following is one way employers can minimize moral hazard?

Taking action to reveal one's own private information is called:

Moral hazard _____ when adverse selection is a problem.

Governments can use public regulation to help solve information asymmetry problems by:

Individuals with an expensive pre-existing condition are more likely to purchase health insurance, which exemplifies _____. Individuals who have health insurance visit the doctor more frequently than individuals who are uninsured, which exemplifies _____.

Adverse selection is a problem that arises _____ the parties have entered into an agreement.

Disclosure laws:

The "private" information revealed during screening typically refers to information that is:

The government requires that every driver have some form of car insurance to address the problem of:

Adverse selection:

Job candidates will seek to provide potential employers with _____ while avoiding _____.

In order for a college degree to be effective as a signal of worker productivity:

Filling gaps in your information by generalizing based on observable characteristics is called:

Statistical discrimination is sometimes:

When you are considering a decision but lack full information, you should:

Economics and Life

Specialization and Exchange

Markets

Elasticity

Efficiency

Government Intervention

Consumer Behavior

Behavioral Economics: a Closer Look at Decision Making

Game Theory and Strategic Thinking

Time and Uncertainty

The Costs of Production

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

The Facts of Production

International Trade

Externalities

Public Goods and Common Resources

Taxation and the Public Budget

Poverty, Inequality, and Discrimination

Political Choices

Public Policy and Choice Architecture

Filters

Individuals with an expensive pre-existing condition are more likely to purchase health insurance, which exemplifies _. Individuals who have health insurance visit the doctor more frequently than individuals who are uninsured, which exemplifies _.

Job candidates will seek to provide potential employers with _ while avoiding _.