Question 1

A credible promise is:

Accepted Answer

A)  a promise that is believed. 
B)  a promise that is backed up by a contract. 
C)  a promise the promisor has an incentive to keep. 
D)  always comes to pass. 
A)  a promise that is believed. 
B)  a promise that is backed up by a contract. 
C)  a promise the promisor has an incentive to keep. 
D)  always comes to pass.

Question 2

The offer to buy health insurance conveys the buyer is more likely to need health care.

Accepted Answer

A) True 
 B)False

Question 3

Ratings and reviews of mechanics on the Internet:

Accepted Answer

A)  make it easier to avoid shady mechanics, thus reducing moral hazard. 
B)  raise the cost to mechanics of exploiting their adverse selection advantage. 
C)  make it easier for mechanics to take advantage of their information advantage. 
D)  completely prevent all forms of information asymmetries. 
A)  make it easier to avoid shady mechanics, thus reducing moral hazard. 
B)  raise the cost to mechanics of exploiting their adverse selection advantage. 
C)  make it easier for mechanics to take advantage of their information advantage. 
D)  completely prevent all forms of information asymmetries.

Question 4

What signal does a college education send? Does this signal eliminate all information asymmetries?

Accepted Answer

A college education may signal that the

Question 5

A cab driver taking an out-of-town rider on a longer route to her destination is an example of adverse selection.

Accepted Answer

A) True 
 B)False

Question 6

Information asymmetries occur when either buyers or sellers don't know what is being exchanged.

Accepted Answer

A) True 
 B)False

Question 7

Moral hazard exists only in markets.

Accepted Answer

A) True 
 B)False

Question 8

When buyers cannot easily evaluate the quality of a good, they may:

Accepted Answer

A)  assume all goods offered for sale are of high quality. 
B)  assume all goods offered for sale are of low quality. 
C)  be willing to pay a price that is too high. 
D)  purchase more of the good. 
A)  assume all goods offered for sale are of high quality. 
B)  assume all goods offered for sale are of low quality. 
C)  be willing to pay a price that is too high. 
D)  purchase more of the good.

Question 9

Why might a job candidate offer to work for less than the market salary for a job? What might this signal to the hiring company?

Accepted Answer

A person searching for a job might be ve

Question 10

The overrating of mortgage-backed securities prior to the financial crash of 2007-2009 was generally attributed to:

Accepted Answer

A)  the fact that customers desiring the ratings paid for them. 
B)  the fact that the sellers of the securities paid for the ratings. 
C)  overzealousness in the securities market. 
D)  the wave of foreclosures prior to and during the financial crash. 
A)  the fact that customers desiring the ratings paid for them. 
B)  the fact that the sellers of the securities paid for the ratings. 
C)  overzealousness in the securities market. 
D)  the wave of foreclosures prior to and during the financial crash.

Question 11

Aligning the incentives of buyers and sellers may help to reduce:

Accepted Answer

A)  mutually beneficial trades. 
B)  moral hazard. 
C)  adverse selection. 
D)  the principal-agent problem. 
A)  mutually beneficial trades. 
B)  moral hazard. 
C)  adverse selection. 
D)  the principal-agent problem.

A credible promise is:

The offer to buy health insurance conveys the buyer is more likely to need health care.

Ratings and reviews of mechanics on the Internet:

What signal does a college education send? Does this signal eliminate all information asymmetries?

A cab driver taking an out-of-town rider on a longer route to her destination is an example of adverse selection.

Information asymmetries occur when either buyers or sellers don't know what is being exchanged.

Moral hazard exists only in markets.

When buyers cannot easily evaluate the quality of a good, they may:

Why might a job candidate offer to work for less than the market salary for a job? What might this signal to the hiring company?

The overrating of mortgage-backed securities prior to the financial crash of 2007-2009 was generally attributed to:

Aligning the incentives of buyers and sellers may help to reduce:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Consumer Choice

Filters

Exam 24: Price Discrimination

A credible promise is:

The offer to buy health insurance conveys the buyer is more likely to need health care.

Ratings and reviews of mechanics on the Internet:

What signal does a college education send? Does this signal eliminate all information asymmetries?

A cab driver taking an out-of-town rider on a longer route to her destination is an example of adverse selection.

Information asymmetries occur when either buyers or sellers don't know what is being exchanged.

Moral hazard exists only in markets.

When buyers cannot easily evaluate the quality of a good, they may:

Why might a job candidate offer to work for less than the market salary for a job? What might this signal to the hiring company?

The overrating of mortgage-backed securities prior to the financial crash of 2007-2009 was generally attributed to:

Aligning the incentives of buyers and sellers may help to reduce:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Consumer Choice

Filters