22 - Chapter 22 Frontiers of Microeconomics MULTIPLE CHOICE...

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Unformatted text preview: Chapter 22 Frontiers of Microeconomics MULTIPLE CHOICE 1 . In economics, a difference in access to relevant knowledge is called a(n) a. behavioral gap. b. frontier gap. c. information asymmetry. d. access imperfection. 2 . When asymmetric information affects a relationship between two parties, it is always the case that a. neither party is well informed. b. one party is better informed than the other party. c. both parties are equally well informed. d. the government is better informed than either of the two parties. 3 . A worker knows more than his employer about how much effort he puts into his job. This is an example of a. an information asymmetry; specifically, it is an example of a hidden action. b. an information asymmetry; specifically, it is an example of a hidden characteristic. c. a hidden action; specifically, it is an example of a hidden characteristic. d. a hidden characteristic; specifically, it is an example of a hidden action. 4 . A seller of a used car knows more than the buyer about the car’s condition. This is an example of a. a hidden action; specifically, it is an example of a hidden characteristic. b. a hidden characteristic; specifically, it is an example of a hidden action. c. an information asymmetry; specifically, it is an example of a hidden action. d. an information asymmetry; specifically, it is an example of a hidden characteristic. 5 . Which of the following relationships involves asymmetric information? a. An employee knows more than his employer knows about his work effort. b. A borrower knows more than the lender about his ability to repay the loan. c. The seller of a 30-year-old house knows more than the buyer about the condition of the house. d. All of the above are correct. 6 . Which of the following relationships involves asymmetric information? a. A physician knows more than his patient about the likely effects of a particular medication that he has prescribed for the patient. b. A worker at an electronics store knows more than his customers about the quality of a certain brand of DVD player. c. A person who is purchasing automobile insurance knows more than the insurance company about his driving habits. d. All of the above are correct. 7 . Frequently it is the case that: (1) A worker knows more than his employer about how much effort he puts into his job; and (2) the seller of a used car knows more than the buyer about the car’s condition....
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22 - Chapter 22 Frontiers of Microeconomics MULTIPLE CHOICE...

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