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Exam 10: Information

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Question 51

Multiple Choice

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In the early 2000s, the government passed laws requiring banks and mortgage brokers to disclose the terms of home loans. Which statement about this action is true?

A) It was an attempt to solve the information asymmetry problem, but it did not work as intended.
B) It solved the information asymmetry problem and led to an improvement in the housing market.
C) The intention of the action was to screen out risky banks and mortgage brokers.
D) It signaled to consumers that the government cared about the value of their homes.

E) B) and C)
F) None of the above

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Question 52

Multiple Choice

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A high school student voluntarily including a writing sample with a college application is an example of:

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

E) B) and D)
F) None of the above

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Question 53

Multiple Choice

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An insurance company offering a high-deductible plan is an example of:

Consumer Reports publishes reviews of many different products on its website. These reviews:

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

Two years ago, Ayesha did not have health insurance. When she was sick, her only option was to go to an urgent care center and pay $150 out of pocket. Ayesha fell ill three times that year, but each time she waited one week for her symptoms to clear up before heading to the doctor. She ended up visiting the urgent care center only once that year. At the beginning of last year, Ayesha started a new job that provided her with health insurance and allowed her to see a doctor for only $20 per visit. Last year, she again fell ill three times, but went to the doctor all three times, waiting only a day or two after her symptoms began to see the doctor.Ayesha's behavior is an example of:adverse selection.moral hazard.the principal-agent problem.

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

Consider a hypothetical used car market in which fifty percent of the cars for sale are low-quality cars and fifty percent of the cars for sale are high-quality cars. Buyers know that half of the cars are high quality and half are low quality, but they do not know which individual cars are high quality and low quality. Sellers know whether their cars are high quality or low quality. Buyers would be willing to pay at most $2,000 for a low-quality car and at most $8,000 for a high-quality car. Sellers of low-quality cars have a willingness to sell of $1,500. Sellers of high-quality cars have a willingness to sell of $7,000.If a buyer offers a price of $5,000 for a used car:

The principal-agent problem occurs:

A market can experience:

Which of the following is an example of a transaction made with incomplete information?

The government can help solve an information asymmetry problem by:

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

Hiring a sports celebrity to advertise a car dealership:

Signaling is when someone takes action to:

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

Information asymmetry is not a problem when:

Suppose there is a used car market with 1,000 cars for sale. Buyers know that 500 of the used cars are of poor quality and are worth only $500, while the other 500 used cars are of good quality and are worth $1,500. However, buyers do not know which individual cars are of poor quality or good quality. The seller of a car knows the worth of the car. In equilibrium, what is the average worth of cars sold in this market?

When shopping for a used car, Anoop is leaning towards buying a Toyota over a Ford, because he has read reports that Toyota is a more reliable car brand. Anoop's behavior is an example of:

Showing up to a job interview without knowing any information about the company is an example of a: