Question 1

Signaling is when someone takes action to:

Accepted Answer

A)  reveal private information about someone else. 
B)  reveal one's own private information. 
C)  find out the opportunity cost of acquiring more information. 
D)  None of these statements is true. 
A)  reveal private information about someone else. 
B)  reveal one's own private information. 
C)  find out the opportunity cost of acquiring more information. 
D)  None of these statements is true.

Question 2

Which of the following is an example of a transaction that is made even though complete information is not possible?

Accepted Answer

A)  Joe buys a puppy in hopes that the puppy will be his hiking companion for the next 20 years. 
B)  Alex buys house insurance and has never filed a claim. 
C)  Mike saves his money by putting it in a mutual fund. 
D)  All of these are examples of transactions that must be made with incomplete information. 
A)  Joe buys a puppy in hopes that the puppy will be his hiking companion for the next 20 years. 
B)  Alex buys house insurance and has never filed a claim. 
C)  Mike saves his money by putting it in a mutual fund. 
D)  All of these are examples of transactions that must be made with incomplete information.

Question 3

An employer asking potential employees to interview with them is an example of:

Accepted Answer

A)  signaling. 
B)  screening. 
C)  statistical discrimination. 
D)  building a reputation. 
A)  signaling. 
B)  screening. 
C)  statistical discrimination. 
D)  building a reputation.

Question 4

A college requesting applicants to submit their high school transcripts is an example of:

Accepted Answer

A)  signaling. 
B)  screening. 
C)  statistical discrimination. 
D)  building a reputation. 
A)  signaling. 
B)  screening. 
C)  statistical discrimination. 
D)  building a reputation.

Question 5

People:

Accepted Answer

A)  always have access to complete information. 
B)  rarely have access to complete information. 
C)  never have access to complete information. 
D)  often have access to complete information. 
A)  always have access to complete information. 
B)  rarely have access to complete information. 
C)  never have access to complete information. 
D)  often have access to complete information.

Question 6

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

Accepted Answer

A)  moral hazard. 
B)  adverse selection. 
C)  building a reputation. 
D)  illegal screening. 
A)  moral hazard. 
B)  adverse selection. 
C)  building a reputation. 
D)  illegal screening.

Question 7

An insurance company offering discounts to students with high grades in school an example of:

Accepted Answer

A)  screening. 
B)  signaling. 
C)  statistical discrimination. 
D)  building a reputation. 
A)  screening. 
B)  signaling. 
C)  statistical discrimination. 
D)  building a reputation.

Question 8

When one person knows more than another,it creates a situation:

Accepted Answer

A)  in which the transaction is always regretted. 
B)  called information asymmetry. 
C)  in which the transaction will not occur. 
D)  called information dominance. 
A)  in which the transaction is always regretted. 
B)  called information asymmetry. 
C)  in which the transaction will not occur. 
D)  called information dominance.

Question 9

Certifying a used car through a brand dealership is one way to:

Accepted Answer

A)  credibly screen out lemons. 
B)  credibly signal the car is not a lemon. 
C)  unreliably screen out lemons. 
D)  unreliably signal that the car is not a lemon. 
A)  credibly screen out lemons. 
B)  credibly signal the car is not a lemon. 
C)  unreliably screen out lemons. 
D)  unreliably signal that the car is not a lemon.

Question 10

Moral hazard:

Accepted Answer

A)  is a normative judgement about the moral choices made by economic agents. 
B)  is about actions and occurs after the parties have voluntarily entered into an agreement. 
C)  is always present when adverse selection arises. 
D)  All of these statements are true. 
A)  is a normative judgement about the moral choices made by economic agents. 
B)  is about actions and occurs after the parties have voluntarily entered into an agreement. 
C)  is always present when adverse selection arises. 
D)  All of these statements are true.

Question 11

When trying out for the football team,the coach may have candidates run a lap around the track.This is an example of:

Accepted Answer

A)  signaling. 
B)  screening. 
C)  strength building. 
D)  training. 
A)  signaling. 
B)  screening. 
C)  strength building. 
D)  training.

Question 12

One of the reasons the student loan repayment plan at Yale did not work was because:

Accepted Answer

A)  complete information was given to both the students and the University. 
B)  there was an adverse selection of students into the program. 
C)  the moral hazard of students made them take riskier jobs. 
D)  the collective bargaining with the students reached an impasse. 
A)  complete information was given to both the students and the University. 
B)  there was an adverse selection of students into the program. 
C)  the moral hazard of students made them take riskier jobs. 
D)  the collective bargaining with the students reached an impasse.

Question 13

Statistical discrimination:

Accepted Answer

A)  can limit the opportunities of individuals just because they happen to belong to a certain group of people. 
B)  can be a rational response to information asymmetry. 
C)  is not always a legal solution to information asymmetry. 
D)  All of these statements are true. 
A)  can limit the opportunities of individuals just because they happen to belong to a certain group of people. 
B)  can be a rational response to information asymmetry. 
C)  is not always a legal solution to information asymmetry. 
D)  All of these statements are true.

Question 14

Governments can use public regulation to help solve information problems by:

Accepted Answer

A)  mandating participation in a market or program. 
B)  making screening illegal. 
C)  mandating employers build a reputation before screening. 
D)  All of these statements are true. 
A)  mandating participation in a market or program. 
B)  making screening illegal. 
C)  mandating employers build a reputation before screening. 
D)  All of these statements are true.

Question 15

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

Accepted Answer

A)  signaling. 
B)  screening. 
C)  statistical discrimination. 
D)  building a reputation. 
A)  signaling. 
B)  screening. 
C)  statistical discrimination. 
D)  building a reputation.

Question 16

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

Accepted Answer

A)  adverse selection. 
B)  moral hazard. 
C)  asymmetric selection. 
D)  information optimization. 
A)  adverse selection. 
B)  moral hazard. 
C)  asymmetric selection. 
D)  information optimization.

Question 17

An example of a market subject to adverse selection would be:

Accepted Answer

A)  the video game market. 
B)  the new appliance market. 
C)  the used car market. 
D)  uniform commodity markets like crude oil. 
A)  the video game market. 
B)  the new appliance market. 
C)  the used car market. 
D)  uniform commodity markets like crude oil.

Question 18

An important type of information asymmetry is:

Accepted Answer

A)  information withholding. 
B)  advantage imbalance. 
C)  moral hazard. 
D)  ethical constraint. 
A)  information withholding. 
B)  advantage imbalance. 
C)  moral hazard. 
D)  ethical constraint.

Question 19

People:

Accepted Answer

A)  often have good enough information to make acceptable choices. 
B)  always have enough information to make acceptable choices. 
C)  always have access to complete information. 
D)  never have access to complete information. 
A)  often have good enough information to make acceptable choices. 
B)  always have enough information to make acceptable choices. 
C)  always have access to complete information. 
D)  never have access to complete information.

Question 20

One way to solve the problems caused by information asymmetry is:

Accepted Answer

A)  screening. 
B)  signaling. 
C)  building a reputation. 
D)  All of these are solutions to information asymmetry. 
A)  screening. 
B)  signaling. 
C)  building a reputation. 
D)  All of these are solutions to information asymmetry.

Exam 10: Information

Signaling is when someone takes action to:

Which of the following is an example of a transaction that is made even though complete information is not possible?

An employer asking potential employees to interview with them is an example of:

A college requesting applicants to submit their high school transcripts is an example of:

People:

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

An insurance company offering discounts to students with high grades in school an example of:

When one person knows more than another,it creates a situation:

Certifying a used car through a brand dealership is one way to:

Moral hazard:

When trying out for the football team,the coach may have candidates run a lap around the track.This is an example of:

One of the reasons the student loan repayment plan at Yale did not work was because:

Statistical discrimination:

Governments can use public regulation to help solve information problems by:

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

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

An example of a market subject to adverse selection would be:

An important type of information asymmetry is:

People:

One way to solve the problems caused by information asymmetry is:

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