Quiz 17 of ECON251 Purdue University In Tutorial Library

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TITLE: Quiz 17 of ECON251 Purdue University

UNIVERSITY / INSTITUTE: Purdue University

CLASS / COURSE: Economics

QUESTION DESCRIPTION:

 
Quiz 17:
 
1. (Points: 1.0)
The term for the conflict between the interests of shareholders and the interests of top
management is:
a. a. asymmetric information.
b. b. moral hazard.
c. c. principal-agent problem.
d. d. adverse selection.
2. (Points: 1.0)
When people who buy insurance change their behavior because they are protected
from loss by the insurance, the insurance market exhibits:
a. a. moral hazard.
b. b. adverse selection.
c. c. asymmetric information.
d. d. economic irrationality.
3. (Points: 1.0)
Asymmetric information is not a problem in:
a. a. buying a used car.
b. b. selling health or life insurance.
c. c. buying a product from a perfectly competitive seller.
d. d. getting married.
4. (Points: 1.0)
If after Joe has been given a year to live because of a terminal disease, he buys life
insurance, then there is:
a. a. a moral hazard.
b. b. a winner's curse.
c. c. an adverse selection.
d. d. complete information.
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5. (Points: 1.0)
Adverse selection can be reduced in the used car market by:
a. a. used car dealers offering a warranty on the cars sold.
b. b. government regulation of the price for used cars.
c. c. buyers revealing how much they want cars.
d. d. all of these.
6. (Points: 1.0)
In a used car market where half are good cars and half are lemons, if buyers are
rational, the prices being offered for a car will result in:
a. a. a mix of half good cars and half lemon cars being sold in an efficient
market.
b. b. most used cars sold being good well cared for used cars and consumer
surplus is increased.
c. c. most used cars sold being lemons and producer surplus is increased.
d. d. a mix of half good cars and half lemon cars being sold but the market
price being inefficient.
7. (Points: 1.0)
When an insurance company attracts buyers who know they are more likely make a
claim on the policy than the insurance company knows, the insurance company is
suffering:
a. a. moral hazard.
b. b. adverse selection.
c. c. asymmetric information.
d. d. economic irrationality.
8. (Points: 1.0)
The problem of adverse selection can be reduced in the health insurance market by:
a. a. insurance companies collecting as much information as they can about
people applying for insurance.
b. b. insurance companies carrying out their own medical examinations of
people applying for insurance.
c. c. insurance companies requiring potential customers to submit their
medical histories.
d. d. all of these.
9. (Points: 1.0)
An efficiency wage is:
a. a. a wage paid that is equal to the market's equilibrium wage.
b. b. a wage paid that is less than the market's equilibrium wage.
c. c. a wage paid that is above the market's equilibrium wage.
d. d. the lowest wage that the firm can hire workers.

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SUBJECTS / CATEGORIES:
1. Business Economics
2. Economics
3. Microeconomics

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