Exam 10: Information

Consumer Reports publishes reviews of many different products on its website. These reviews:

Less skilled drivers are more likely to buy auto insurance with lower deductibles. Economists use this as an example of:

An employer asking for a list of references from a potential employee is an example of:

Which of the following is an example of a transaction made with incomplete information?

When shopping for a used car, Anoop is leaning towards buying a Toyota over a Ford, because he has read reports that Toyota is a more reliable car brand. Anoop's behavior is an example of:

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. In equilibrium, what is the average worth of cars sold in this market?

A market can experience:

An insurance company offering a high-deductible plan is an example of:

In the early 2000s, the government passed laws requiring banks and mortgage brokers to disclose the terms of home loans. Which statement about this action is true?

Two years ago, Ayesha did not have health insurance. When she was sick, her only option was to go to an urgent care center and pay $150 out of pocket. Ayesha fell ill three times that year, but each time she waited one week for her symptoms to clear up before heading to the doctor. She ended up visiting the urgent care center only once that year. At the beginning of last year, Ayesha started a new job that provided her with health insurance and allowed her to see a doctor for only $20 per visit. Last year, she again fell ill three times, but went to the doctor all three times, waiting only a day or two after her symptoms began to see the doctor.Ayesha's behavior is an example of:adverse selection.moral hazard.the principal-agent problem.

Hiring a sports celebrity to advertise a car dealership:

When the government mandates participation in a program to solve an information asymmetry problem, it is trying to prevent:

A high school student voluntarily including a writing sample with a college application is an example of:

Signaling is when someone takes action to:

Showing up to a job interview without knowing any information about the company is an example of a:

Information asymmetry is not a problem when:

The principal-agent problem occurs:

Consider a hypothetical used car market in which fifty percent of the cars for sale are low-quality cars and fifty percent of the cars for sale are high-quality cars. Buyers know that half of the cars are high quality and half are low quality, but they do not know which individual cars are high quality and low quality. Sellers know whether their cars are high quality or low quality. Buyers would be willing to pay at most $2,000 for a low-quality car and at most $8,000 for a high-quality car. Sellers of low-quality cars have a willingness to sell of $1,500. Sellers of high-quality cars have a willingness to sell of $7,000.If a buyer offers a price of $5,000 for a used car:

When the parties to a transaction have access to different information:

The government can help solve an information asymmetry problem by: