Subject is microeconomics

| February 14, 2018

QUESTION 1QUESTION 2QUESTION 3When the buyer is more knowledgeable than the seller, there is a/an:perfect information problem.asymmetric informationproblem.the lemon problem.moral hazard problem.The result of adverse selection is that:higher-quality producers receive a higher price than they would if adverse selection was not present.higher-quality producers drive lower-quality producers out of the market.lower-quality producers drive higher-quality producers out of the market.consumers will be able to purchase only high-quality products.In the market for insurance:sellers.buyers generally have less information thansellers generally have less information thanbuyers.buyers and sellers have perfect information.there is no adverse selection problem.QUESTION 4Consider a market in which some high-quality goods are sold, but not as many as if there was perfect information aboutthe quality of the good. This type of market is known as a:efficientmarket.beneficialselection.thin market.symmetricmarket.QUESTION 5If insurance premiums are based on an experience rating:firms will not be concerned with the health problems of job applicants.insurance premiums are based on the past medical bills of a firm’s employees.every firm in a given area pays the same price for medical insurance.firms have no incentive to try to lower the health care costs of their employees.QUESTION 6QUESTION 7is:Which of the following is an example of moral hazard?a person who drives more recklessly after obtaining automobile insurancea driver who reduces his level of insurance coverage after his premiums risea person who engages in unrisky behavior after enrolling in his firm’s health insurance planall of the aboveIf one side of the market, either the buyer or seller of a good or service has better information than the other side, therea free-riderproblem.information.an external cost.asymmetricmoral hazard.QUESTION 8When considering the adverse-selection problem in the case of medical insurance, as the cost of insurance rises:healthy people might reduce their coverage while unhealthy people will maintain their coverage.both healthy and unhealthy people will likely maintain their coverage.unhealthy people might reduce their coverage, while healthy people will maintain their coverage.both healthy and unhealthy people will likely reduce their coverage.QUESTION 9People take greater risks knowing that part of the cost of any undesirable outcome will be transferred to a second party.This kind of problem is called:thickmarkets.aninjunction.adverseselection.moralhazard.QUESTION 10In the market for automobile insurance, asymmetric information occurs when:insured drivers drive more recklessly than uninsured drivers.drivers with greater risk purchase more automobile insurance.insured drivers drive more safely than uninsured drivers.automobile insurance is universal.

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