Exam 19: Asymmetric Information

-The market for used cars is shown in the above figure.Buyers cannot tell whether any given car is a lemon.For all cars offered for sale to be sold,the percent of all cars that are lemons is θ.What happens to θ if car buyers incur a $100 transaction cost when buying a used car?

In the automobile insurance market,adverse selection occurs when

If the market interest rate is 5% and a bank advertises loans at 12%,the bank will receive

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

Adverse selection can occur when

If adverse selection exists in a market,

If a life insurance company does not require a medical exam of its policyholders,it is most likely that the company

Why would a firm rather a company like J.D.Power (which provides product satisfaction reviews)review its product than doing it within the firm?

What is one of the most important benefits of the Internet?

For much of its history,General Motors was characterized by having versions of the same car with different nameplates,e.g.,Chevrolet vs.Cadillac.This business model has seemed less successful in recent years.What might explain this?

-The market for used cars is shown in the above figure.Buyers cannot tell whether any given car is a lemon.The percent of all cars that are lemons is θ.What value of θ is necessary for all cars to be sold?

The cost,c,of a college education that serves only as a signal of a high-quality worker is $20,000.The wage of a known high-quality worker,w_h,is $75,000.The wage for a known low-quality worker,w_l,is $50,000.For what value of the share of the work force that is of high quality,t,is a pooling equilibrium possible?

If getting accepted into college is very difficult because of high standards of intelligence and ability,but students learn absolutely nothing while in college,it is most likely that

Employers verify the facts of potential employees' resumes to avoid

Firms are not allowed to ask certain questions during job interviews,including marital status or how many children you have.Why is this the case?

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.

In the tourist-trap model,a consumer might pay more than marginal cost for a good sold in a competitive market if the cost of possibly finding the good cheaper is more than the markup over marginal cost.

Competitive firms are able to set price above marginal cost when

The lemons problem is due to

Explain why high priced lawyers may support an industry ban on price advertising for lawyers.