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Tests, Surveys, and Pools Tests
Test Canvas : Self-Test Quiz - Chapter 20
Microeconom ics, 3e
Test Canvas: Self-Test Quiz - Chapter 20
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Total Questions 20
Total Points 20
1. Multiple Choice: Suppose your income falls by 10%. If ...
Question Suppose your income falls by 10%. If you are risk-averse, your utility will fall by:
Answer
more than 10%.
2. Multiple Choice: Which of the following statements is ...
Question Which of the following statements is true for an individual who has diminishing
marginal utility from income?
Answer An added dollar of wealth adds more to her utility when she is wealthy than
when she is poor.
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Points: 1
Points: 1
3. Multiple Choice: Differences in attitudes towards risk...
Question Differences in attitudes towards risk among different individuals arise because of:
Answer
differences in individuals' personalities.
4. Multiple Choice: Which of the following is the best il...
Question Which of the following is the best illustration of the problem of private information?
Points: 1
Points: 1
5. Multiple Choice: Moral hazard occurs when:
Question Moral hazard occurs when:
6. Multiple Choice: Suppose you have an annual income of ...
Question Suppose you have an annual income of $50,000 and you face a 1% chance of
incurring a $20,000 loss next year. What is your expected income?
7. Multiple Choice: The presence of private information p...
Question The presence of private information prevents an efficient allocation of risk when:
Points: 1
Points: 1
Points: 1
8. Multiple Choice: The expected value of a random variab...
Question The expected value of a random variable is the:
Answer
one value most likely to be realized.
9. Multiple Choice: The premium for a fair insurance policy:
Question The premium for a fair insurance policy:
Points: 1
Points: 1
10. Multiple Choice: The economic motivation for buying in...
Question The economic motivation for buying insurance is to:
11. Multiple Choice: When risk is traded between individuals:
Question When risk is traded between individuals:
12. Multiple Choice: Markets allow agents to achieve an ef...
Question Markets allow agents to achieve an efficient allocation of risk unless:
Points: 1
Points: 1
Points: 1
13. Multiple Choice: Diversification works to reduce the p...
Question Diversification works to reduce the probability of severe losses by:
14. Multiple Choice: Individuals sometimes pool their capi...
Question Individuals sometimes pool their capital with other investors to:
15. Multiple Choice: When people have different risks and ...
Points: 1
Points: 1
Points: 1
Question When people have different risks and their behavior is based on private information
about those risks that is not known to all parties involved, we often find ________ in
the market:
16. Multiple Choice: When people behave differently becaus...
Question When people behave differently because of access to insurance, we often find
_________ in the market.
17. Multiple Choice: As it applies to the used car market,...
Question As it applies to the used car market, the problem of adverse selection means that
Points: 1
Points: 1
18. Multiple Choice: A health insurance company that asks ...
Question A health insurance company that asks its customers whether they smoke is
engaging in:
19. Multiple Choice: The problem of moral hazard can be ad...
Question The problem of moral hazard can be addressed by:
Answer
lecturing the insured person about the risks involved.
20. Multiple Choice: Some managers can be lazy and free ri...
Question
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Some managers can be lazy and free ride on the brand name of a good, possibly
harming that brand. How do fast-food restaurants avoid the problem of moral hazard
with regard to the operation of each store location?
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