Asymmetric Ques - CHAPTER 17 Markets With Asymmetric...

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CHAPTER 17 Markets With Asymmetric Information MULTIPLE CHOICE Section 17.1 easy 1. Used cars sell for much less than new cars because a. of imperfect competition in the automobile industry. b. buyers know much more about the quality of cars than sellers do. c. sellers know much more about the quality of cars than buyers do. d. physical depreciation of cars is very high. e. of licensing arrangements by the government. easy 2. The problem of adverse selection in insurance results in a situation in which a. people choose inappropriate or inadequate coverage because they do not understand the complex information in the policies. b. people choose too much coverage because they do not understand the complex information in the policies. c. people choose too little coverage because they do not understand the complex information in the policies. d. unhealthy people become more likely to buy insurance than healthy people, which drives premiums up, which drives even more healthy people away from the market. e. healthy people become more likely to buy insurance than unhealthy people, which drives premiums up, which drives even more unhealthy people away from the market even though they are the ones who need it most. moderate 3. Julia is a 28-year-old nonsmoking, non-drinking female of normal weight. Because of adverse selection in health insurance, a. She will be charged less for her premiums than people who are higher risks. b. She is less likely to buy health insurance than the average person, because policy premiums are based on expected medical expenditures of people who are less healthy than she is. c. When she get health insurance, she will be less likely to take care of herself. d. She must get health insurance early in life, and is likely to lose health insurance if she smokes, drinks to excess, or gains weight. e. She is more likely than the average person to buy health insurance, because she is more likely to be offered it. 88
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CHAPTER 17 TEST BANK MARKETS WITH ASYMMETRIC INFORMATION SIXTH EDITION moderate 4. John is a 55-year-old male smoker, about 50 pounds overweight, who has high blood sugar and drinks to excess a couple of times each month. Because of adverse selection in health insurance, a. John is less likely to buy health insurance than the average person, because the average person’s policy premiums will be based on his risk, not the average risk. b. John is more likely to buy health insurance than the average person, because his policy premiums will be based on the average risk, not his personal risk. c. when John gets health insurance, he will be less likely to take care of himself. d. when John gets health insurance, he will be more likely to take care of himself. e.
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Asymmetric Ques - CHAPTER 17 Markets With Asymmetric...

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