05 Jun Question QUESTION 1 When the buyer is more knowledgeable than the seller, th
Question
QUESTION 1
When the buyer is more knowledgeable than the seller, there is a/an:
perfect information problem.
asymmetric information
problem.
the lemon problem.
moral hazard problem.
QUESTION 2
The result of adverse selection is that:
higher-quality producers receive a higher price than they would if adverse selection was not present.
higher-quality producers drive lower-quality producers out of the market.
lower-quality producers drive higher-quality producers out of the market.
consumers will be able to purchase only high-quality products.
QUESTION 3
In the market for insurance:
sellers.
buyers generally have less information than
sellers generally have less information than
buyers.
buyers and sellers have perfect information.
there is no adverse selection problem.
QUESTION 4
Consider a market in which some high-quality goods are sold, but not as many as if there was perfect information about
the quality of the good. This type of market is known as a:
efficient
market.
beneficial
selection.
thin market.
symmetric
market.
QUESTION 5
If insurance premiums are based on an experience rating:
firms will not be concerned with the health problems of job applicants.
insurance premiums are based on the past medical bills of a firm’s employees.
every firm in a given area pays the same price for medical insurance.
firms have no incentive to try to lower the health care costs of their employees.
QUESTION 6
QUESTION 7
is:
Which of the following is an example of moral hazard?
a person who drives more recklessly after obtaining automobile insurance
a driver who reduces his level of insurance coverage after his premiums rise
a person who engages in unrisky behavior after enrolling in his firm’s health insurance plan
all of the above
If one side of the market, either the buyer or seller of a good or service has better information than the other side, there
a free-rider
problem.
information.
an external cost.
asymmetric
moral hazard.
QUESTION 8
When considering the adverse-selection problem in the case of medical insurance, as the cost of insurance rises:
healthy people might reduce their coverage while unhealthy people will maintain their coverage.
both healthy and unhealthy people will likely maintain their coverage.
unhealthy people might reduce their coverage, while healthy people will maintain their coverage.
both healthy and unhealthy people will likely reduce their coverage.
QUESTION 9
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