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Markets with
Private Information
12
CLICKER QUESTIONS
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Checkpoint 12.1
Checkpoint 12.2
Checkpoint 12.3
Question 1
Question 5
Question 8
Question 2
Question 6
Question 9
Question 3
Question 7
Question 10
Question 4
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CHECKPOINT 12.1
Question 1
Asymmetric information means that ___________.
A. the buyer always has information that the seller does not
have
B. the seller must have information that the buyer does not
have
C. either the buyer or the seller has information that the
other does not have
D. the buyer and the seller have the same information
E. the seller has more information than the seller
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CHECKPOINT 12.1
Question 2
The lemons problem in the used car market is that ______.
A. the price of a lemon is too high
B. the price of a lemon is too low
C. no lemons are bought or sold
D. only lemons are bought and sold
E. the price of a lemon is too high and too many lemons are
traded
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CHECKPOINT 12.1
Question 3
In the used car market with a pooling equilibrium, the price
of a lemon is _____ the price of a good car, and with a
separating equilibrium, the price of a lemon is ______ the
price of a good car.
A.
B.
C.
D.
E.
less than; equal to
equal to; less than
equal to; more than
more than; equal to
equal to; equal to
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CHECKPOINT 12.1
Question 4
If buyers cannot assess the quality of used cars and there
are no warranties, then___________.
A. only lemons are sold
B. only good cars are sold
C. good cars are sold at a higher price than lemons
D. there is no adverse selection problem
E. all cars (lemons and good cars) sell for the same price
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CHECKPOINT 12.2
Question 5
Mark is an aggressive driver so he is more likely to buy auto
insurance. This situation illustrates the idea of ________.
A.
B.
C.
D.
E.
moral hazard
adverse selection
the lemons problem
inefficiency in the insurance market
a separating equilibrium
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CHECKPOINT 12.2
Question 6
When Sam makes an agreement and then behaves after the
agreement in a way to increase his benefits and harm the
other party to the agreement, Sam is illustrating ________.
A.
B.
C.
D.
E.
signaling
adverse selection
moral hazard
the cost of contracting
a pooling equilibrium
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CHECKPOINT 12.2
Question 7
Screening _______.
A. leads to a pooling equilibrium in the insurance market
B. means that an uninformed person passes knowledge to an
informed person
C. makes no-claim bonuses unnecessary
D. explains why insurance companies offer both low-premium,
high-deductible policies and high-premium, low-deductible
policies.
E. makes the insurance market inefficient
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CHECKPOINT 12.3
Question 8
Moral hazard in the market for health-care services leads
______.
A. patients to adopt healthier life styles
B. to a separating equilibrium
C. everyone to buy health insurance
D. healthy people not to bother buying health insurance
E. health-care providers to overtreat patients
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CHECKPOINT 12.3
Question 9
The missing market in the health-care market is the
insurance market for _______.
A. young healthy people
B. infectious diseases
C. people who have pre-existing health conditions
D. people who are employed by HMOs
E. vaccinations
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CHECKPOINT 12.3
Question 10
Vaccinations against infectious diseases ____ , so private
markets will provide _____ efficient quantity of vaccinations.
A.
B.
C.
D.
E.
are a public good; less than the
are a public good; the
lead to adverse selection; less than the
have a positive externality; less than the
have a positive externality; the
© 2013 Pearson