2 points 2 points 2 points 2 points Question 1 \"It doesn\'t hurt to get more in

Question

2 points

2 points

2 points

2 points

Question 1

1. "It doesn't hurt to get more information . . ." is good advice Answer
   especially when the opportunity cost of acquiring the information is high
   when information is less than perfect
   only if the marginal benefit of information is greater than the marginal cost of information
   only if the marginal benefit of information is equal to the marginal cost of information
   only if the marginal benefit of information is less than the marginal cost of information

2 points

Question 2

1. A principal-agent problem arises when Answer
   only less-qualified workers apply for a job
   a firm must find a proxy for unobservable qualities needed in employees
   potential employees have more information about their own productivity than do prospective employers
   a customer knows little about the service provided by a business
   a customer knows little about the service provided by a business and is, therefore, given poor service

2 points

Question 3

1. Adverse selection is a situation in which one party, as a result of a contract, has an incentive to alter their behavior in a way that harms the other party to the contract. Answer True
   False

2 points

Question 4

1. An IOU reflecting the corporation's promise to pay the holder a fixed sum of money at a designated maturity date plus an annual interest payment until maturity is Answer
   a bond
   a stock certificate
   a prospectus
   a golden parachute
   an underwriting note

2 points

Question 5

1. An example of screening job applicants is Answer
   listing years of education on r

Explanation / Answer

1]when information is less than perfect

2]potential employees have more information about their own productivity than do prospective employers

3]True

4]a stock certificate

5]sending in letters of recommendation

6]nearly double

7]a color TV

8]consume now rather than late

9]False

10]False

11]supply of loanable funds will increase

12]the opportunity cost of consuming a good in the future increases and saving, therefore, falls

13]a stockbroker calls with financial advice

14]moral hazard

15]more bad loans than good loans may be made

16]pay above average wages

17]nominal interest

18]increase as additional information is obtained

19]if the payment comes sooner than expected

20]diminishing marginal returns

21]the principal-agent problem

22] True

23]The insured group becomes less healthy on average

24]a rise in the marginal product of capital

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