1) Recall the Application about federal quality standards in the market for kiwi
ID: 1215608 • Letter: 1
Question
1) Recall the Application about federal quality standards in the market for kiwifruit to answer the following question(s). Recall the Application. Prior to enactment of the federal government's order:
Select one:
a. grocers were willing to pay less for any California kiwifruit than for any New Zealand kiwifruit. b. grocers were willing to pay more for any California kiwifruit than for any New Zealand kiwifruit. Incorrect c. grocers were willing to pay more for California kiwifruit that had been harvested at maturity than for any New Zealand kiwifruit. d. California and New Zealand kiwifruit sold for the same price.
2)Recall the Application. The market for baseball players suffers from adverse selection because ________ the used car market, buyers (potential new teams) ________ goods (pitchers) that are lemons (low quality).
Select one: a. unlike; have difficulty identifying b. like; have difficulty identifying c. unlike; can more easily identify d. like; can more easily identify Incorrect
3)Suppose an insurance company determines that the average annual malpractice cost is $10,000 for reckless lawyers and $500 for careful lawyers. If 10% of the lawyers insured by the company are reckless, the company will earn zero economic profit if the price of insurance is:
Select one: a. $500. b. $1,450. c. $5,250. Incorrect d. $10,000.
4) Suppose that Harold buys collision insurance for his car and then drives it recklessly. This is an example of: Select one: a. a positive spillover. b. moral hazard. c. adverse selection. Incorrect d. irrational behavior.
5) Suppose that lenders believe that the government will provide assistance if too many of the lenders' borrowers do not pay back their loans. If lenders expect government assistance they will:
Select one:
a. make more loans to borrowers who are less likely to repay them. b. make fewer loans to borrowers who are less likely to repay them. c. increase the interest rates that they charge borrowers who are less likely to repay loans. Incorrect d. not change their lending policies because this expectation is not reasonable.
6) Which of the following is an example of moral hazard?
Select one:
a. a person who drives more recklessly after obtaining automobile insurance b. a person who engages in unrisky behavior after enrolling in his firm's health insurance plan c. a driver who reduces his level of insurance coverage after his premiums rise d. All of these Incorrect
Explanation / Answer
1) which application??
2) b. like; have difficulty identifying
3) b. $1,450
Expected return = 10% of $ 10,000 + 90% of $ 500 = 1,000 + 450 = $ 1,450
4) b. moral hazard. It refers to a situation where one side of market cannot observe action of the other. For this reason it is sometimes called hidden action problem.
5) a. make more loans to borrowers who are less likely to repay them.
6) a. a person who drives more recklessly after obtaining automobile insurance
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.