Exam 19: Asymmetric Information

-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?

Government mandated safety standards within firms

-The market for used cars is shown in the above figure.Buyers cannot tell whether any given car is a lemon.The percent of all cars that are lemons is θ.What value of θ is necessary for all cars to be sold?

Explain how product liability laws can reduce adverse selection.

The Internet has made it possible to compare lots of prices without incurring a lot of cost.This

If the government provides universal health insurance,what screening process will the government need?

A firm is more likely to adopt multiple brand names for the same product when the good is a nondurable.

If bad drivers can usually avoid being ticketed by the police,then insurance companies will

If a student achieves a high SAT score,this

If all consumers are uninformed about the quality of a product

If a person attends a public college and is not hired because the boss went to a private college,this might be an example of

If consumers have limited information about price and search costs exist,then

The number of brands of identical products will most likely increase as

What is one reason the eBay seller reputation system is important?

-Joe wants to achieve the highest position possible with the XYZ Co.During the interview,he tells them he is capable of performing many difficult tasks.The company feels there is a 10% chance he is lying.Given the payoff matrix in the above figure,what job level will the company offer to Joe? Why?

Why would a firm rather a company like J.D.Power (which provides product satisfaction reviews)review its product than doing it within the firm?

Signals may prevent adverse selection if

A necessary condition for a separating equilibrium when workers can use education as a signal of their ability is

If a bank offers mortgages that do not require the normal 20% down payment,the bank encourages

-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?