Site MapHelpFeedbackMultiple Choice Quiz
Multiple Choice Quiz
(See related pages)

1.
Given the typical shapes of the marginal costs and marginal benefits of collecting information,
A)there is no equilibrium amount.
B)consumers tend to become experts about most goods.
C)consumers remain completely ignorant about most goods.
D)the equilibrium is somewhere between complete ignorance and becoming an expert.
E)it always pays to get more information.
2.
Tom goes to a nearby stereo equipment retailer to learn about top quality equipment. The sales assistant spends an hour talking to Tom and demonstrating equipment. Tom then leaves and orders the system he liked from an Internet store and saves €250. Tom is a(n)
A)smart shopper.
B)jerk.
C)free rider.
D)example of adverse selection.
E)example of statistical discrimination.
3.
Markets in which asymmetric information are desribed in terms of the:
A)asymmetric model.
B)risk adverse model.
C)adverse selection model.
D)lemons model.
E)Coase model.
4.
Where asymmetric information generates a "lemons market" for used cars an inexpert buyer
A)has a reservation price reflecting the statistical probability that a car is a"lemon"
B)has a reservation price that is the average of his reservation price for a good car and the going price for used cars
C)will always be willing to pay more from a well known dealership than from a private seller he does not know
D)can never be persuaded (rationally) to pay more than the average going price for a car
E)A) and C)
5.
In which of the following markets is the presence of asymmetric information most critical for the buyers?
A)The market for meat.
B)The market for used books.
C)The market for shirts.
D)The market for existing houses.
E)The market for lumber.
6.
The relevance of expected value to the search decision of the consumer is:
A)the outcome of a particular search is certain.
B)one may not be able to purchase the good after it is found.
C)the outcome of a particular search is uncertain.
D)one always knows the value of the next search.
E)one only continues to search if the expected value is positive.
7.
The probability that Juanita will like the play she is going to see is 90% and has a value of €40. Not liking the play has a value of -€10. The expected value of going to the movie is:
A)€40.
B)€36.
C)€35.
D)€30.
E)€27.
8.
The difference between the price of electronic equipment in a retail store and at an Internet store reflects in part
A)the extent to which middlemen drive the price up for extra profit.
B)the lack of competition between brick and mortar stores and online stores.
C)the value of personal attention and support at the retail store.
D)excessive markup.
E)that online stores do not profit maximize.
9.
The invisible hand will lead to __________ information than is socially optimal because of __________.
A)more; free riders
B)less; external benefits
C)more; external costs
D)less; a prisoner's dilemma
E)less; free riders
10.
The reason a warranty on a used car communicates credible information is because
A)it indicates the car is of below average quality.
B)everyone offers one.
C)only those cars that are of better than average quality will be warranted.
D)it indicates the car is of average quality.
E)it may not be honoured.





To learn more about the book this website supports, please visit its Information Center.
(c)2006 McGraw-Hill Education Europe
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Education Europe is one of the many fine businesses of The McGraw-Hill Companies.


Principles of EconomicsOnline Learning Center

Home > Chapter 12 > Multiple Choice Quiz