Exam 18: Asymmetric Information

-The market for used cars is shown in the above figure.Neither buyers nor sellers can tell whether any given car is a lemon.Ten percent (10%)of all cars are lemons.Which of the following statements is true?

If diplomas work efficiently in signaling productive capabilities to employers,the resulting equilibrium

When relatively few workers have high ability,

If an employer cannot distinguish the ability of workers a separating equilibrium will result.

-The market for used cars is shown in the above figure.Buyers cannot tell whether any given car is a lemon.Ten percent (10%)of all cars are lemons.Which of the following statements is true?

A person starting to drive more recklessly after signing a contract with an automobile insurance company is an example of

Auto insurance rates are lower for young women relative to young men.An unusually reckless young woman driver benefits from this

In the tourist-trap model,a consumer might pay more than marginal cost for a good sold in a competitive market if the cost of possibly finding the good cheaper is more than the markup over marginal cost.

If the market interest rate is 5% and a bank advertises loans at 12%,the bank will receive

If low-quality workers are unable to obtain a college degree,then a separating equilibrium can occur if

Which of the following reduces the effects of asymmetric information?

Assume Health Insurance is provided universally by the government.This would

If you sell your DVD player on eBay you will be better informed about the quality of the product than any potential buyer.This is called

Cheap talk works at placing workers in the right job as long as

Life insurance companies often give applicants a physical examination to prevent

-The market for used cars is shown in the above figure.Buyers cannot tell whether any given car is a lemon.Forty percent (40%)of all cars are lemons.Which of the following statements is true?

-The above figure shows the payoff to two firms in an industry deciding to make an investment in worker safety.The dominant strategy for each firm

Investment in safety at the firm level poses a prisoners' dilemma because

With asymmetric information among consumers and positive search costs,a firm may

Competitive firms are able to set price above marginal cost when