Question 1

Disclosure laws:

Accepted Answer

A)   are an example of how government attempts to solve information asymmetry in markets.
B)   are an example of how government attempts to screen unethical businesses out of the marketplace.
C)   are an example of how government forces businesses to signal to consumers if they are credible.
D)   are a way businesses can build their reputation.E) All of the above
F) A) and D)

Question 2

The presence of adverse selection:

Accepted Answer

A)   reduces the efficiency of markets.
B)   increases the efficiency of markets.
C)   does not affect the efficiency of markets.
D)   makes the buyer less efficient and the seller more efficient.E) B) and C)
F) C) and D)

Question 3

One reason dressing well for a job interview may not be an effective signal is

Accepted Answer

A)   people who are more serious about getting a job will make the investment in a new suit.
B)   buying a suit takes time away from studying.
C)   it is costly for a person less interested in the job to buy a new suit.
D)   a person who has successfully completed a job-training program might be unable to afford a new suit.E) B) and C)
F) A) and B)

Question 4

Which of the following would be an example of a transaction later regretted because it was made with incomplete information?

Accepted Answer

A)   Sue purchased a lottery ticket that did not win her any money.
B)   Larry moved to a new apartment but later decided it was too small for his needs.
C)   Tim bought products from a seller that knew they were defective.
D)   All of these are good examples of incomplete information.E) None of the above
F) A) and C)

Question 5

Completing a college degree signals to employers that you are:

Accepted Answer

A)   intelligent.
B)   hardworking.
C)   able to complete assignments.
D)   All of these are signals one gives with a college degree.E) B) and D)
F) C) and D)

Question 6

The government can help solve the information asymmetry problem by:

Accepted Answer

A)   providing the missing information to the less-informed party.
B)   requiring the more informed party to reveal the missing information.
C)   finding ways to make the same amount of information known to both parties.
D)   All of these statements are true.E) C) and D)
F) None of the above

Question 7

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

Accepted Answer

A)   surfing.
B)   signaling.
C)   proofing.
D)   All of these are solutions to information asymmetry.E) A) and B)
F) B) and C)

Question 8

Adverse selection occurs in the insurance market because:

Accepted Answer

A)   the seller has more information than the buyer.
B)   the buyer has more information than the seller.
C)   both the buyer and the seller have incomplete information.
D)   Any of these could be the cause of adverse selection in insurance market.E) A) and B)
F) A) and C)

Question 9

A job candidate refusing to take a drug test for a potential employer is an example of:

Accepted Answer

A)   screening.
B)   building a reputation.
C)   signaling.
D)   principles-based behavior.E) B) and C)
F) A) and D)

Question 10

Statistical discrimination:

Accepted Answer

A)   can limit the opportunities of individuals just because they happen to belong to a certain group of people.
B)   is an irrational response to information asymmetry.
C)   is always a legal solution to information asymmetry.
D)   All of these statements are true.E) C) and D)
F) None of the above

Question 11

What method is often used when both parties want to eliminate information asymmetry?

Accepted Answer

A)   Screening.
B)   Signaling.
C)   Statistical discrimination.
D)   Moral hazard.E) C) and D)
F) A) and C)

Question 12

Markets that are more likely to be subject to adverse selection problems are those where:

Accepted Answer

A)   information is easily available to consumers and sellers.
B)   there is an imbalance of information between buyers and sellers
C)   the goods sold in that market are highly uniform in quality.
D)   the market relies on independent certifiers of quality.E) B) and C)
F) All of the above

Question 13

Imbalances in information can cause problems between:

Accepted Answer

A)   buyers and sellers.
B)   lenders and borrowers.
C)   employers and employees.
D)   All of these statements are true.E) None of the above
F) All of the above

Question 14

Taking action to reveal one's own private information is called:

Accepted Answer

A)   screening.
B)   signaling.
C)   statistical discrimination.
D)   proofing.E) B) and C)
F) A) and B)

Question 15

Risky transactions are those in which:

Accepted Answer

A)   complete information is not available.
B)   there is an balance of information between buyer and seller.
C)   one party to a transaction uses the other party's lack of information to their advantage.
D)   one party withholds information from the other party and uses that to his advantage.E) A) and B)
F) A) and C)

Question 16

If the cost of acquiring more information outweighs the benefit of having more information about a good,then we can predict:

Accepted Answer

A)   the exchange will definitely not take place.
B)   the exchange may take place anyway.
C)   the exchange will not benefit anyone.
D)   the exchange will take place, but will be regretted in the future.E) C) and D)
F) All of the above

Question 17

When a transaction takes place repeatedly,then one way to signal to avoid information asymmetry is:

Accepted Answer

A)   building a reputation.
B)   screening.
C)   statistical discrimination.
D)   Any of these could be true.E) A) and D)
F) All of the above

Question 18

An example of screening during the hiring process is:

Accepted Answer

A)   just asking for the information.
B)   an interview.
C)   checking references.
D)   All of these are ways to screen candidates.E) C) and D)
F) A) and D)

Question 19

An insurance company offering both high-deductible and low-deductible plans is an example of:

Accepted Answer

A)   signaling.
B)   statistical discrimination.
C)   building a reputation.
D)   screening.E) A) and B)
F) None of the above

Question 20

In the early 2000s,laws requiring banks and mortgage brokers to disclose the terms of home loans:

Accepted Answer

A)   prevented Americans from entering into mortgage contracts that they did not understand.
B)   were an example of how the government can act to solve the moral hazard problem.
C)   were so numerous and detailed that borrowers didn't read or understand the information the companies had disclosed.
D)   reduced statistical discrimination in the home mortgage market.E) B) and C)
F) A) and D)

Exam 10: Information

Disclosure laws:

Correct AnswerverifiedShow Answer

An example of screening during the hiring process is:

Correct AnswerverifiedShow Answer

Risky transactions are those in which:

Correct AnswerverifiedShow Answer

If the cost of acquiring more information outweighs the benefit of having more information about a good,then we can predict:

Correct AnswerverifiedShow Answer

A job candidate refusing to take a drug test for a potential employer is an example of:

Correct AnswerverifiedShow Answer

One reason dressing well for a job interview may not be an effective signal is

Correct AnswerverifiedShow Answer

Completing a college degree signals to employers that you are:

Correct AnswerverifiedShow Answer

The presence of adverse selection:

Correct AnswerverifiedShow Answer

Adverse selection occurs in the insurance market because:

Correct AnswerverifiedShow Answer

When a transaction takes place repeatedly,then one way to signal to avoid information asymmetry is:

Correct AnswerverifiedShow Answer

Taking action to reveal one's own private information is called:

Correct AnswerverifiedShow Answer

An insurance company offering both high-deductible and low-deductible plans is an example of:

Correct AnswerverifiedShow Answer

Statistical discrimination:

Correct AnswerverifiedShow Answer

In the early 2000s,laws requiring banks and mortgage brokers to disclose the terms of home loans:

Correct AnswerverifiedShow Answer

What method is often used when both parties want to eliminate information asymmetry?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would be an example of a transaction later regretted because it was made with incomplete information?

Correct AnswerverifiedShow Answer

Markets that are more likely to be subject to adverse selection problems are those where:

Correct AnswerverifiedShow Answer

The government can help solve the information asymmetry problem by:

Correct AnswerverifiedShow Answer

Imbalances in information can cause problems between:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified