There is an average price for a used car that

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163. There is an average price for a used car that accounts for both good used cars and bad used cars ("lemons"). At thecurrent market price for used cars, the persons __________ likely to offer their used cars for sale are people who own__________.a. most; "lemons"b. least; good used carsc. least; "lemons"d. a and be. There is not enough information to answer the question.ANSWER:dPOINTS:1DIFFICULTY:ModerateNATIONAL STANDARDS:United States - BUSPROG: AnalyticLOCAL STANDARDS:United States - OH - Default City - DISC: Markets, market failure, a - DISC:Markets, market failure, and externalitiesKEYWORDS:Bloom's: Application164. Some racing horse breeders keep a few of their foals and sell the others. Generally, they put the poorest quality foalsup for sale early in the season. Buyers have limited information about the foals up for sale, but they know that the first
foals from some breeders will not be good racers. Other breeders sell all their foals. Since buyers cannot know whichbreeders are keeping back their good foals, they are suspicious of all foals offered for sale early in the season, loweringthe sale prices. Breeders who sell all their foals are therefore forced to hold back their better foals until later in the season,to get true market prices for them. The market for foals is therefore subject to thea. adverse selection problem.b. moral hazard problem.c. free-rider effect.d. none of the aboveANSWER:aPOINTS:1DIFFICULTY:ModerateNATIONAL STANDARDS:United States - BUSPROG: AnalyticLOCAL STANDARDS:United States - OH - Default City - DISC: Markets, market failure, a - DISC:Markets, market failure, and externalitiesKEYWORDS:Bloom's: Application165. Which of the following statements isfalse?a. Asymmetric information can exist both before and after a transaction.b.Moral hazard occurs when one party to a transaction changes his or her behavior in away that is hidden from and costly to the other party.c. Adverse selection has the potential to eliminate some markets.d.none of the aboveANSWER:dPOINTS:1DIFFICULTY:ModerateNATIONAL STANDARDS:United States - BUSPROG: AnalyticLOCAL STANDARDS:United States - OH - Default City - DISC: Markets, market failure, a - DISC:Markets, market failure, and externalitiesKEYWORDS:Bloom's: Comprehension166. Suppose a person with automobile collision insurance is more likely to try to drive on an icy road in the middle ofwinter than that person would be if he or she didn't have automobile collision. This is an example ofa. adverse selection.b. moral hazard.c. the free-rider effect.d. asymmetric information beforeexchange.e. none of the aboveANSWER:bPOINTS:1DIFFICULTY:ModerateNATIONAL STANDARDS:United States - BUSPROG: AnalyticLOCAL STANDARDS:United States - OH - Default City - DISC: Markets, market failure, a - DISC:Markets, market failure, and externalities
KEYWORDS:Bloom's: Application

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Term
Spring
Professor
BassamY.Yousif
Tags
Macroeconomics, Externality, STANDA United States

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