Asymmetric Information & Public Goods Quiz

Asymmetric information occurs when:

• Both parties have the same information

• Government controls the market

• One party has more information than the other

• Prices are fixed

A common example of asymmetric information is found in:

• Perfect competition

• Buying insurance

• Monopolies

• Public goods

Adverse selection typically happens:

• After a transaction

• During inflation

• Before a transaction

• During taxation

Moral hazard occurs:

• Before a contract is signed

• After one party takes on more risk

• During pricing

• When there is perfect information

In insurance markets, adverse selection refers to:

• Insuring only healthy people

• High-risk individuals seeking more insurance

• Companies lowering premiums

• Moral behavior of clients

Which of the following reduces asymmetric information?

• Advertising

• Screening and signaling

• Printing money

• Restricting trade

Which is a form of moral hazard?

• Paying higher taxes

• Driving recklessly after buying insurance

• Refusing to sign a contract

• Filing for bankruptcy

Adverse selection and moral hazard are both results of:

• Government failure

• Price elasticity

• Information asymmetry

• Trade policies

Signaling in economics involves:

• Sending signals to the stock market

• One party revealing private information

• Increasing wages

• Decreasing supply

Which market often suffers from adverse selection?

• Job market

• Car resale market

• Retail market

• Commodity market