Question 1

When the parties to a deal have access to different information:

Accepted Answer

A)  markets will be efficient. 
B)  parties will voluntarily share information truthfully in order to achieve efficiency. 
C)  markets may fail to exist in such cases. 
D)  parties will blindly trust one another. 
A)  markets will be efficient. 
B)  parties will voluntarily share information truthfully in order to achieve efficiency. 
C)  markets may fail to exist in such cases. 
D)  parties will blindly trust one another.

Question 2

User-feedback scores on eBay are an example of:

Accepted Answer

A)  screening. 
B)  statistical discrimination. 
C)  building a reputation. 
D)  None of these statements is true. 
A)  screening. 
B)  statistical discrimination. 
C)  building a reputation. 
D)  None of these statements is true.

Question 3

Information asymmetry is not a problem when:

Accepted Answer

A)  the wants of both parties are aligned with one another. 
B)  the wants of both parties are opposed to one another. 
C)  the constraints of both parties are identical. 
D)  both parties lack the same information. 
A)  the wants of both parties are aligned with one another. 
B)  the wants of both parties are opposed to one another. 
C)  the constraints of both parties are identical. 
D)  both parties lack the same information.

Question 4

When you are faced with a lack of information concerning a purchase,you should:

Accepted Answer

A)  consider the opportunity cost of gaining more information. 
B)  always seek out the most information you can before making a purchase. 
C)  not make the purchase without complete information. 
D)  None of these statements is true. 
A)  consider the opportunity cost of gaining more information. 
B)  always seek out the most information you can before making a purchase. 
C)  not make the purchase without complete information. 
D)  None of these statements is true.

Question 5

Moral hazard is a problem that arises:

Accepted Answer

A)  before the parties have entered into an agreement. 
B)  after the parties have voluntarily entered into an agreement. 
C)  either before or after the parties have entered into an agreement. 
D)  rarely in any market. 
A)  before the parties have entered into an agreement. 
B)  after the parties have voluntarily entered into an agreement. 
C)  either before or after the parties have entered into an agreement. 
D)  rarely in any market.

Question 6

The principal-agent problem:

Accepted Answer

A)  arises from an imbalance of information. 
B)  is caused by the principal having imperfect information about the agent. 
C)  is caused by the principal being unable to perfectly observe the actions of the agent. 
D)  All of these statements are true. 
A)  arises from an imbalance of information. 
B)  is caused by the principal having imperfect information about the agent. 
C)  is caused by the principal being unable to perfectly observe the actions of the agent. 
D)  All of these statements are true.

Question 7

Building a good reputation in the marketplace:

Accepted Answer

A)  is easy to fake. 
B)  can take a long time to establish. 
C)  is not a significant value to a seller. 
D)  All of these statements are true. 
A)  is easy to fake. 
B)  can take a long time to establish. 
C)  is not a significant value to a seller. 
D)  All of these statements are true.

Question 8

Some people make purchases without complete information because:

Accepted Answer

A)  they are irrational. 
B)  the opportunity cost of getting more information outweighs the benefit of having more information. 
C)  the benefit of having more information outweighs the opportunity cost of acquiring it. 
D)  No one makes purchases without complete information. 
A)  they are irrational. 
B)  the opportunity cost of getting more information outweighs the benefit of having more information. 
C)  the benefit of having more information outweighs the opportunity cost of acquiring it. 
D)  No one makes purchases without complete information.

Question 9

Information asymmetry is present when:

Accepted Answer

A)  one person knows more than another. 
B)  there is risk. 
C)  when both parties are lacking the same information. 
D)  All of these statements are true. 
A)  one person knows more than another. 
B)  there is risk. 
C)  when both parties are lacking the same information. 
D)  All of these statements are true.

Question 10

An example of statistical discrimination would be:

Accepted Answer

A)  charging young drivers a higher premium than older drivers. 
B)  charging homes near a lake higher premiums for flood insurance than those on a hill. 
C)  assuming the food will be better at an Italian restaurant than a Chinese one in the Little Italy neighborhood of NYC. 
D)  All of these are examples of statistical discrimination. 
A)  charging young drivers a higher premium than older drivers. 
B)  charging homes near a lake higher premiums for flood insurance than those on a hill. 
C)  assuming the food will be better at an Italian restaurant than a Chinese one in the Little Italy neighborhood of NYC. 
D)  All of these are examples of statistical discrimination.

Question 11

Some policy makers have suggested that mandatory health insurance coverage would:

Accepted Answer

A)  help to reduce the cost of health care. 
B)  overcome adverse selection in the market for health insurance. 
C)  keep premiums lower than if healthy people could opt out. 
D)  All of these statements are true. 
A)  help to reduce the cost of health care. 
B)  overcome adverse selection in the market for health insurance. 
C)  keep premiums lower than if healthy people could opt out. 
D)  All of these statements are true.

Question 12

Taking action to reveal private information about someone else is called:

Accepted Answer

A)  screening. 
B)  signaling. 
C)  discriminating. 
D)  illegal. 
A)  screening. 
B)  signaling. 
C)  discriminating. 
D)  illegal.

Question 13

The principal-agent problem:

Accepted Answer

A)  is when the principal has more information than the agent. 
B)  is when the agent is tempted to put in more effort than the principal would like. 
C)  is commonly seen in the employer-employee relationship. 
D)  is when the principal and agent have the same objectives. 
A)  is when the principal has more information than the agent. 
B)  is when the agent is tempted to put in more effort than the principal would like. 
C)  is commonly seen in the employer-employee relationship. 
D)  is when the principal and agent have the same objectives.

Question 14

User reviews of products on store websites that reassure buyers of the quality is an example of:

Accepted Answer

A)  screening. 
B)  building a reputation. 
C)  statistical discrimination. 
D)  None of these statements is true. 
A)  screening. 
B)  building a reputation. 
C)  statistical discrimination. 
D)  None of these statements is true.

Question 15

Generalizing using statistical discrimination is:

Accepted Answer

A)  an irrational response and always leads to loss of surplus. 
B)  a rational response to being on the wrong end of an information asymmetry. 
C)  a rational response, although government always steps in to prevent it. 
D)  All of these statements are true. 
A)  an irrational response and always leads to loss of surplus. 
B)  a rational response to being on the wrong end of an information asymmetry. 
C)  a rational response, although government always steps in to prevent it. 
D)  All of these statements are true.

Question 16

Which of the following is a case of asymmetric information:

Accepted Answer

A)  The buyer and seller of a used car donâ€™t know how long the car will operate. 
B)  A provider of health insurance does not know whether a specific client is a smoker or not. 
C)  Neither you nor the insurance company has perfect information about whether a flood will occur. 
D)  None of the above are examples of asymmetric information. 
A)  The buyer and seller of a used car donâ€™t know how long the car will operate. 
B)  A provider of health insurance does not know whether a specific client is a smoker or not. 
C)  Neither you nor the insurance company has perfect information about whether a flood will occur. 
D)  None of the above are examples of asymmetric information.

Question 17

Requiring that applicants get drug tested 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 18

An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:

Accepted Answer

A)  statistical discrimination. 
B)  mandating that information be shared. 
C)  proofing. 
D)  All of these are ways to solve information asymmetry. 
A)  statistical discrimination. 
B)  mandating that information be shared. 
C)  proofing. 
D)  All of these are ways to solve information asymmetry.

Question 19

An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:

Accepted Answer

A)  screening. 
B)  mandating that information be shared. 
C)  proofing. 
D)  racial discrimination. 
A)  screening. 
B)  mandating that information be shared. 
C)  proofing. 
D)  racial discrimination.

Question 20

Asymmetric information in a transaction can result in:

Accepted Answer

A)  moral hazard. 
B)  adverse selection. 
C)  a lemons problem. 
D)  All of these statements are true. 
A)  moral hazard. 
B)  adverse selection. 
C)  a lemons problem. 
D)  All of these statements are true.

Exam 10: Information

When the parties to a deal have access to different information:

User-feedback scores on eBay are an example of:

Information asymmetry is not a problem when:

When you are faced with a lack of information concerning a purchase,you should:

Moral hazard is a problem that arises:

The principal-agent problem:

Building a good reputation in the marketplace:

Some people make purchases without complete information because:

Information asymmetry is present when:

An example of statistical discrimination would be:

Some policy makers have suggested that mandatory health insurance coverage would:

Taking action to reveal private information about someone else is called:

The principal-agent problem:

User reviews of products on store websites that reassure buyers of the quality is an example of:

Generalizing using statistical discrimination is:

Which of the following is a case of asymmetric information:

Requiring that applicants get drug tested is an example of:

An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:

An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:

Asymmetric information in a transaction can result in:

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