Problem 1: If the seller knows more about the good than the buyer, there exists:
a. an externality.
b. asymmetric information.
c. moral hazard.
d. a public goods problem
Problem 2: If the market for used computers has only lemons (low-quality computers) then the market:
a. is an example of a thick market.
b. suffers from an adverse selection problem.
c. is a type of monopoly.
d. must be monopolistically competitive
Problem 3: Adverse selection in employment is more likely when:
a. jobs require specific training.
b. everyone is equally qualified for the job.
c. people's abilities are easy to measure.
d. people's abilities are difficult for potential employers to observe.
Problem 4: In a _____market there are few high-quality goods for sale while in a ____market there are many high-quality goods for sale.
a. thin; thicker.
b. thicker; thin.
c. inefficient; efficient.
d. weak; strong.
Problem 5: Suppose buyers in the used car market are willing to pay $3,500 for a plum (high-quality) used car and $1,500 for a lemon (low-quality) used car. If buyers believe that 30% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?
a. $2000
b. $2500
c. $2900
d. $3500
Problem 6: A market in which there are neither spillover benefits nor spillover costs is:
a. efficient.
b. in efficient.
c. efficient but not equitable.
d. impossible.
Problem 7: The discoveries from space exploration are examples of:
a. private goods.
b. external goods.
c. public goods.
d. spillover goods.
Problem 8: A college education generates:
a. no benefits.
b. only private benefits.
c. only spillover benefits.
d. both private and spillover benefits.
Problem 9: Arranging matching charitable contributors will______ the free-rider problem and lead to a _____ level of contribution to the public good.
a. increase; smaller.
b. increase; larger.
c. reduce; smaller.
d. reduce; larger.
Problem 10: The theory of government that assumes that the goal of government is to make the government more efficient is called:
a. public choice economics.
b. the public interest view.
c. the efficient markets hypothesis.
d. the voter theory.