Question 1Offering a warranty is an example of: A.the principal-agent problem. B.signaling. C.adverse selection. D.moral hazardQuestion 2When a health insurance company sells an insurance policy, adverse selection suggests: A.doctors will prescribe more health services than their insured patients need. B.the more unhealthy a person is the more likely they are to buy insurance. C.people will purchase the insurance and then use more health care than they need. D.people who purchase the policies will demand more expensive procedures.Question 3A cab driver taking an out-of-town rider on a longer route to her destination is an example of adverse selection. True FalseQuestion 4The principal-agent problem occurs when a used car buyer cannot determine the maintenance history of a used care. True False Question 5When moral hazard occurs, the economy produces goods that no one wants to pay for. True FalseQuestion 6The offer to buy health insurance conveys the buyer is more likely to need health care. True FalseQuestion 7The Affordable Care Act eliminates all information asymmetries in the health insurance market. True FalseQuestion 8Markets are not able to handle information asymmetries and will break down when they exist. True FalseQuestion 9If education takes time to obtain but does not add to productivity, it creates an inefficiency. True False Question 10Moral hazard occurs when an agent tries to exploit information advantage in a dishonest way. True FalseQuestion 11Ratings systems can be manipulated and therefore do not always eliminate moral hazard. True False
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