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

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

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c Enzo drives more recklessly after he buys car insurance

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d Fatima chooses to attend a well-respected college

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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”

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b It must be free to the signaling party

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

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dIt must be applied to an inexpensive product

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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

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bsignaling

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cmoral hazard

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dadverse selection

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View Answer screening

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


aall of these answers

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bforced contributions to a retirement plan

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cyear-end bonuses

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defficiency wages

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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

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bPeople easily change their minds when confronted with new information

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cPeople enjoy going to the doctor

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dPeople tend to plan ahead and follow through on their plans

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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

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b75/25

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c 99/1

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d1/99

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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

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

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cThe outcome preferred by the median voter wins

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dThe outcome preferred by the greatest number of voters wins.

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


aThe median voter always wins

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bno dictators

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cindependence of irrelevant

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dtransitivity

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


a75 percent

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b35 percent

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c60 percent

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d40 percent

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View Answer 60 percent

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


atransitivity

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bimpossibility

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cindependence

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dunanimity

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View Answer transitivity

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