Question 1

​The following is not an example of risk aversion

Accepted Answer

A) ​you lock your garage when you have expensive workshop tools 
B) you are more careful when you buy a more expensive car 
C) Individuals tend to gamble more with their money when the future is certain 
D) ​you only go swimming when the lifeguard is not on duty 
A) ​you lock your garage when you have expensive workshop tools 
B) you are more careful when you buy a more expensive car 
C) Individuals tend to gamble more with their money when the future is certain 
D) ​you only go swimming when the lifeguard is not on duty

Question 2

​Scatterbrain Samantha often forgets to lock her house.This has caused the probability of a burglary to be 30%.If her house gets broken into,she faces a property loss of $10,000,otherwise she gets to keep her $100,000.If Samantha is offered a full coverage insurance policy for her house at $2000,would she buy the insurance?

Accepted Answer

A) ​Yes because she gets to now enjoy her wealth risk-free 
B) No,because she can take the risk and be better off 
C) Yes,because she gains on average with the insurance 
D) ​Both A&C 
A) ​Yes because she gets to now enjoy her wealth risk-free 
B) No,because she can take the risk and be better off 
C) Yes,because she gains on average with the insurance 
D) ​Both A&C

Question 3

​Trades between risk lovers and risk takers

Accepted Answer

A) ​Move assets to lower-value use 
B) Move assets to higher value use 
C) Create wealth 
D) ​Both B&C 
A) ​Move assets to lower-value use 
B) Move assets to higher value use 
C) Create wealth 
D) ​Both B&C

Question 4

Wearing an expensive business suit to an interview is a kind of​

Accepted Answer

A) ​Screening mechanism 
B) Signaling mechanism 
C) Way to waste money 
D) ​None of the above 
A) ​Screening mechanism 
B) Signaling mechanism 
C) Way to waste money 
D) ​None of the above

Question 5

​Use the following setup for question
Both Nadia and Samantha are applying to insure their car against theft.Nadia lives in a secure neighborhood,where the probability of theft is 10%.Samantha lives in a lesser secure neighborhood where the probability of theft is 25%.Both Nadia and Samantha own cars worth $10,000,and are willing to pay $100 over expected loss for insurance.
-​How much would Samantha be willing to pay for the insurance?

Accepted Answer

A) ​$1000 
B) $1100 
C) $2500 
D) ​$2600 
A) ​$1000 
B) $1100 
C) $2500 
D) ​$2600

Question 6

​To signal to your insurance company that you are a low risk individual you should

Accepted Answer

A) ​Accept an insurance policy with no co-payments 
B) Accept an insurance policy with co-payments 
C) Accept an insurance policy with a low deductible 
D) ​None of the above 
A) ​Accept an insurance policy with no co-payments 
B) Accept an insurance policy with co-payments 
C) Accept an insurance policy with a low deductible 
D) ​None of the above

Question 7

​Screening is

Accepted Answer

A) ​actions by the informed party to reveal her true risks 
B) actions by the informed party to conceal her true risks 
C) actions by the uninformed party to uncover the true risks 
D) ​actions by the uninformed party to conceal the true risks 
A) ​actions by the informed party to reveal her true risks 
B) actions by the informed party to conceal her true risks 
C) actions by the uninformed party to uncover the true risks 
D) ​actions by the uninformed party to conceal the true risks

Question 8

​Lara will agree to a second date with Tom only if,on their first date,Tom is well mannered and well dressed.Lara is using a

Accepted Answer

A) ​Screening mechanism 
B) Signaling mechanism 
C) All of the above 
D) ​None of the above 
A) ​Screening mechanism 
B) Signaling mechanism 
C) All of the above 
D) ​None of the above

Question 9

​In the market for insurance

Accepted Answer

A) ​The high risk customers would remain unserved 
B) The low risk customers would remain unserved 
C) Both the types of customers would be served 
D) ​Neither type of customer would be served 
A) ​The high risk customers would remain unserved 
B) The low risk customers would remain unserved 
C) Both the types of customers would be served 
D) ​Neither type of customer would be served

Question 10

​Sally would only agree to a second date with Andy if she sees him leave a generous tip for the waiter on their first dinner date.This is an example of a

Accepted Answer

A) ​Screening mechanism 
B) Signaling mechanism 
C) Way to waste money 
D) ​None of the above 
A) ​Screening mechanism 
B) Signaling mechanism 
C) Way to waste money 
D) ​None of the above

Question 11

​In the market for newly developed real estate,adverse selection could occur when

Accepted Answer

A) ​The buyers can observe and detect all the features of the properties 
B) The buyers know more about the property than the developers 
C) The developers of the property know more about the properties than the buyers 
D) ​Neither parties knows about the item properly 
A) ​The buyers can observe and detect all the features of the properties 
B) The buyers know more about the property than the developers 
C) The developers of the property know more about the properties than the buyers 
D) ​Neither parties knows about the item properly

Question 12

​The reason some insurance customers are more eager to purchase insurance is

Accepted Answer

A) ​they are more risk averse 
B) they are less risk averse 
C) they have a greater risk of making a claim 
D) ​Both A&C 
A) ​they are more risk averse 
B) they are less risk averse 
C) they have a greater risk of making a claim 
D) ​Both A&C

Question 13

Grooming well for a big date is a​

Accepted Answer

A) ​Screening mechanism 
B) Signaling mechanism 
C) Way to waste money 
D) ​None of the above 
A) ​Screening mechanism 
B) Signaling mechanism 
C) Way to waste money 
D) ​None of the above

Question 14

​Most people buy insurance because they

Accepted Answer

A) ​are risk lovers 
B) enjoy the gamble 
C) are risk neutral 
D) ​are risk averse 
A) ​are risk lovers 
B) enjoy the gamble 
C) are risk neutral 
D) ​are risk averse

Question 15

​Hiring Tech Support
Collin County Community College (CCCC)has an ongoing problem that the electronic equipment in their classrooms and computer labs keeps malfunctioning and the repairs that are made seem to cause problems with some other aspect of the equipment.Due to its bureaucratic structure,CCCC has a hiring preference for their own students and it is only allowed to pay $15 per hour when the going rate is closer to $18 per hour.How does this contribute to CCCC's equipment problems?

Accepted Answer

​CCCC is a victim of adverse selection.T

Question 16

​The following is an example of adverse selection

Accepted Answer

A) ​A majority of those applying for well paid jobs are under qualified 
B) More reckless drivers opt for cars with fewer safety devices 
C) Individuals living in less secure neighborhoods want to buy less insurance 
D) ​Individuals with a strong family history of heart diseases opt to buy less insurance 
A) ​A majority of those applying for well paid jobs are under qualified 
B) More reckless drivers opt for cars with fewer safety devices 
C) Individuals living in less secure neighborhoods want to buy less insurance 
D) ​Individuals with a strong family history of heart diseases opt to buy less insurance

Question 17

​If you buy an insurance policy with a high deductible and co-payments,you would end up paying

Accepted Answer

A) ​A higher premium 
B) A lower premium 
C) The premium of a low risk individual 
D) ​Both B&C 
A) ​A higher premium 
B) A lower premium 
C) The premium of a low risk individual 
D) ​Both B&C

Question 18

​Use the following setup for question
Both Nadia and Samantha are applying to insure their car against theft.Nadia lives in a secure neighborhood,where the probability of theft is 10%.Samantha lives in a lesser secure neighborhood where the probability of theft is 25%.Both Nadia and Samantha own cars worth $10,000,and are willing to pay $100 over expected loss for insurance.
-If the company can correctly anticipate the adverse selection,what premiums would it charge?​

Accepted Answer

A) ​$2500 
B) $2600 
C) $1000 
D) ​$1100 
A) ​$2500 
B) $2600 
C) $1000 
D) ​$1100

Question 19

​Which of the following is NOT a way to signal high quality

Accepted Answer

A) ​wearing everyday clothes to a job interview 
B) leaving a big tip for the waiter after a dinner date 
C) offering an expensive engagement ring to your bride 
D) ​Visiting the beauty salon before a big date 
A) ​wearing everyday clothes to a job interview 
B) leaving a big tip for the waiter after a dinner date 
C) offering an expensive engagement ring to your bride 
D) ​Visiting the beauty salon before a big date

Question 20

​Which of the following is NOT a way to signal high quality

Accepted Answer

A) ​wearing a business suit on a job interview 
B) leaving a big tip for the waiter after a dinner date 
C) offering an expensive engagement ring to your bride 
D) ​Doing messy chores before a big date 
A) ​wearing a business suit on a job interview 
B) leaving a big tip for the waiter after a dinner date 
C) offering an expensive engagement ring to your bride 
D) ​Doing messy chores before a big date

The following is not an example of risk aversion

Trades between risk lovers and risk takers

Wearing an expensive business suit to an interview is a kind of

To signal to your insurance company that you are a low risk individual you should

Screening is

Lara will agree to a second date with Tom only if,on their first date,Tom is well mannered and well dressed.Lara is using a

In the market for insurance

Sally would only agree to a second date with Andy if she sees him leave a generous tip for the waiter on their first dinner date.This is an example of a

In the market for newly developed real estate,adverse selection could occur when

The reason some insurance customers are more eager to purchase insurance is

Grooming well for a big date is a

Most people buy insurance because they

The following is an example of adverse selection

If you buy an insurance policy with a high deductible and co-payments,you would end up paying

Which of the following is NOT a way to signal high quality

Which of the following is NOT a way to signal high quality

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Exam 17: The Problem of Adverse Selection

​The following is not an example of risk aversion

​Trades between risk lovers and risk takers

Wearing an expensive business suit to an interview is a kind of​

​To signal to your insurance company that you are a low risk individual you should

​Screening is

​Lara will agree to a second date with Tom only if,on their first date,Tom is well mannered and well dressed.Lara is using a

​In the market for insurance

​Sally would only agree to a second date with Andy if she sees him leave a generous tip for the waiter on their first dinner date.This is an example of a

​In the market for newly developed real estate,adverse selection could occur when

​The reason some insurance customers are more eager to purchase insurance is

Grooming well for a big date is a​

​Most people buy insurance because they

​The following is an example of adverse selection

​If you buy an insurance policy with a high deductible and co-payments,you would end up paying

​Which of the following is NOT a way to signal high quality

​Which of the following is NOT a way to signal high quality

The One Lessor of Business

Benefits, Costs, and Decisions

Extent How Much Decisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, Trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

The following is not an example of risk aversion

Trades between risk lovers and risk takers

Wearing an expensive business suit to an interview is a kind of

To signal to your insurance company that you are a low risk individual you should

Screening is

Lara will agree to a second date with Tom only if,on their first date,Tom is well mannered and well dressed.Lara is using a

In the market for insurance

Sally would only agree to a second date with Andy if she sees him leave a generous tip for the waiter on their first dinner date.This is an example of a

In the market for newly developed real estate,adverse selection could occur when

The reason some insurance customers are more eager to purchase insurance is

Grooming well for a big date is a

Most people buy insurance because they

The following is an example of adverse selection

If you buy an insurance policy with a high deductible and co-payments,you would end up paying

Which of the following is NOT a way to signal high quality

Which of the following is NOT a way to signal high quality