Exam 12: Markets with Private Information

In the used car market,________ is (are)a way of signaling.

In the used car market with no warranties,the equilibrium is a ________ and there is ________.

Consider a market for used cars.Suppose there are only two kinds of cars: lemons and good cars.A lemon is worth $1,500 both to its current owner and to anyone who buys it.A good car is worth $6,000 to its current and potential owners.Buyers can't tell whether a car is a lemon until after they have bought the car.What do economists call the problem that buyers of used cars face? What is the price of a used car? Explain and substantiate your answer.

In the auto insurance market,who is most likely to have private information that leads to adverse selection?

The used car market without warranties suffers from

In an insurance market,moral hazard exists chiefly because of

In the used car market,adverse selection is a problem primarily when

In the market for auto insurance,with a pooling equilibrium ________ and with a separating equilibrium ________.

The lemons problem is caused by

In the used car market with no warranties,the market for lemons (poor quality used cars)is ________ and the market for good cars is ________.

In the used car market with warranties,the equilibrium is a ________ and the lemons problem is ________.

Most observers suggest that health care in the United States faces two major problems:

The lemons problem in the used car market is that

The figures show two auto insurance markets, one market for safe drivers and one market for aggressive drivers. -In a pooling equilibrium,there ________ a deadweight loss in the market for safe drivers,and there ________ a deadweight loss in the market for aggressive drivers.

In the used car market,adverse selection creates the lemon problem when

The private market ________ health care because it sometimes ________ those with pre-existing conditions and because health care has ________ benefits. A) underprovides; includes; external B) underprovides; excludes; external C) overprovides; includes; external D) overprovides; excludes; internal E) underprovides; includes; internal

Consider a market for used cars.Suppose there are only two kinds of cars: lemons and good cars.A lemon is worth $1,500 both to its current owner and to anyone who buys it.A good car is worth $6,000 to its current and potential owners.Buyers can't tell whether a car is a lemon until after they have bought the car.What do economists call the problem that buyers of used cars face? What kind of cars (lemons,good cars,or both)are traded? Explain and substantiate your answer.

One way of screening in the automobile insurance market is for companies to

Suppose that there are only two types of used cars,peaches and lemons.Peaches are worth $10,000,and lemons are worth $6,000.Three fourths of all used cars are peaches,and one fourth are lemons.In a market with no signals,for instance,a market without warranties,the average value of cars actually sold will be

Used car buyers believe a car is good quality when the seller signals the car's quality by offering a warranty because