Chapter22 - Chapter 22 Frontiers of Microeconomics MULTIPLE...

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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. ANSWER: c. information asymmetry. TYPE: M DIFFICULTY: 1 SECTION: 22.1 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. ANSWER: b. one party is better informed than the other party. TYPE: M DIFFICULTY: 1 SECTION: 22.1 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. ANSWER: a. an information asymmetry; specifically, it is an example of a hidden action. TYPE: M DIFFICULTY: 2 SECTION: 22.1 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. ANSWER: d. an information asymmetry; specifically, it is an example of a hidden characteristic. TYPE: M DIFFICULTY: 2 SECTION: 22.1 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. ANSWER: d. All of the above are correct. TYPE: M DIFFICULTY: 1 SECTION: 22.1 163 164 ✦ Chapter 22/Frontiers of Microeconomics 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....
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Chapter22 - Chapter 22 Frontiers of Microeconomics MULTIPLE...

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