Economics MCQs

Page No. 163

Which of the following best demonstrates the problem of moral hazard ?


a Josephine doesn’t buy health insurance because it is too expensive, and she is healthy


bA life insurance company forces Enzo to have a medical examination prior to selling him insurance


c Enzo drives more recklessly after he buys car insurance


d Fatima chooses to attend a well-respected college



Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective ?


aIt must be “as seen on TV”


b It must be free to the signaling party


c It must be costly to the signaling party but less costly to the party with higher-quality product


dIt must be applied to an inexpensive product



Nicole wants to avoid buying a car that is a lemon. She takes a car she would like to buy to her mechanic before she purchases it. This is known as ?


ascreening


bsignaling


cmoral hazard


dadverse selection


View Answer screening

Which of the following is a response to People’s inconsistent behavior over time ?


aall of these answers


bforced contributions to a retirement plan


cyear-end bonuses


defficiency wages



Jamil’s friend dies of a sudden heart attack. Jamil rushes to his doctor for an expensive physical examination. This response demonstrates that ?


a People give too much weight to a small number of vivid observations


bPeople easily change their minds when confronted with new information


cPeople enjoy going to the doctor


dPeople tend to plan ahead and follow through on their plans



In the ultimatum game, what split would be rational for both the person proposing the split and the person who must accept or reject the split ?


a There is no rational solution


b75/25


c 99/1


d1/99


View Answer 99/1

Which of the following is true under pairwise majority rule if people vote for the outcome closest to their most preferred outcome ?


aThe average preferred outcome wins


bThere is no clear winner due to Arrow’s Impossibility Theorem.


cThe outcome preferred by the median voter wins


dThe outcome preferred by the greatest number of voters wins.



hich of the following is not a property required of a perfect voting system ?


aThe median voter always wins


bno dictators


cindependence of irrelevant


dtransitivity



Refer to Figure 1 What percent of the population vote for A when the choice is between A and B ?


a75 percent


b35 percent


c60 percent


d40 percent


View Answer 60 percent

A life insurance company forces Enzo to have a medical examination prior to selling him insurance ?


atransitivity


bimpossibility


cindependence


dunanimity


View Answer transitivity

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