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.Ten percent (10%)of all cars are lemons.Which of the following statements is true?

A person who starts practicing poisonous snake charming after signing a contract with a health insurance company is an example of

A pooling equilibrium occurs when

-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?

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

Life insurance companies often give applicants a physical examination to prevent

The cost,c,of a college education that serves only as a signal of a high-quality worker is $10,000.The wage of a known high-quality worker,w_h,is $30,000.The wage for a known low-quality worker,w_l,is $10,000.For what value of the share of the work force that is of high quality,s,is a pooling equilibrium possible?

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

In a competitive market with large search costs,many firms,and asymmetric information,why is the monopoly price the only possible single-price equilibrium?

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

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

A physical examination is not a good screening device for life insurance companies if

-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

Empirical studies conclude that advertising

Adverse selection occurs when

Adverse selection occurs when there is

Some companies subject their applicants to extensive tests.Why?

If there is zero search cost,then in the presence of asymmetric information,competitive firms will

Explain what may occur when a buyer and a seller have unequal amounts of limited information.Describe two different types of problems that may arise when asymmetric information exists.

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