Exam 18: Asymmetric Information

A consumer is likely to avoid adverse selection and get a high-quality lunch at

-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?

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

In a company,if high-ability workers get paid $80,000,while low-ability workers get paid $50,000,the education (MBA)that can qualify the workers as high-ability ones cost $20,000.What's the highest share of high-ability workers to get a separating equilibrium?

Explain why some people who are applying for a job at a bank dress up,arrive early,and have their paperwork neatly completed for the job interview.

-The market for used cars is shown in the above figure.Neither buyers nor sellers can tell whether any given car is a lemon.Forty percent (40%)of all cars are lemons.Which of the following statements is TRUE?

A downtown diner daily serving the same business people will be more likely to serve a tasty lunch than a snack bar at a tourist attraction.

Some companies subject their applicants to extensive tests.Why?

-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.However,sellers can switch to selling lemons at lower costs.Which of the following statements is TRUE?

-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?

New smartphone applications are developed to help consumers find the cheapest prices in the neighborhood.As a result,

Employers verify the facts of potential employees' resumes to avoid

With asymmetric information among consumers and positive search costs c,all the other firms in the market are charging a monopoly price Pm.A firm may lower its price

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

Adverse selection occurs when

Used car buyers will believe that a car is of good quality when the seller signals the car's high quality by offering a warranty when

If a student achieves a high SAT score,this

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

If reckless drivers are more likely to buy automobile insurance than safe drivers are,

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