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Asymmetric Information – MCQs
17 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
Why do companies often distribute bonuses to employees in highly profitable years to avoid dissatisfaction among workers?
Individuals always act to maximize their own benefits
Individuals tend to resist changing their opinions
Individuals display inconsistent behavior over time
Individuals value fairness and equity
2.
Which statement is incorrect regarding how individuals make decisions?
Individuals tend to overemphasize a few striking examples.
People often overestimate their own skills and knowledge.
All the listed statements accurately describe decision-making behaviors.
People consistently act as perfectly rational decision-makers.
Individuals are hesitant to revise their opinions when presented with new evidence.
3.
In a survey of voters' spending preferences for artwork in City Hall, 40% favor Rs1,000, 25% prefer Rs20,000, and 35% choose Rs22,000. What are the median, mean, and mode of these spending amounts respectively?
Rs20,000; Rs20,000; Rs22,000
Rs1,000; Rs14,333; Rs1,000
Rs20,000; Rs13,100; Rs1,000
Rs1,000; Rs20,000; Rs22,000
Rs22,000; Rs15,000; Rs20,000
4.
Which scenario best illustrates the concept of moral hazard?
Josephine opts out of purchasing health insurance due to its high cost and her good health.
Before issuing a policy, a life insurer requires Enzo to undergo a medical check-up.
After obtaining car insurance, Enzo begins to drive less cautiously.
Fatima decides to enroll in a prestigious university.
5.
What condition must a signal meet to effectively convey private information about a product or service?
It should be advertised on popular television channels
The signal must incur no expense for the sender
The signal has to be expensive for the sender, yet less burdensome for those offering higher-quality goods
It needs to be used only for low-cost items
6.
Nicole wants to prevent purchasing a defective car. Before making the purchase, she has a mechanic inspect the vehicle. What is this process called?
screening
signaling
moral hazard
adverse selection
none of the above
7.
Which of the following strategies addresses the issue of individuals' inconsistent actions over time?
every one of the listed methods
mandatory payments into a retirement savings plan
bonuses given at the end of the year
paying wages designed to boost productivity
8.
After Jamil's friend suddenly dies from a heart attack, Jamil immediately seeks an expensive medical check-up. What does this behavior illustrate?
Individuals place excessive importance on a few striking instances
Individuals readily alter their opinions when presented with new facts
Individuals have a strong preference for visiting doctors
Individuals are inclined to make plans and consistently execute them
9.
In the ultimatum game, which division of the amount is considered a rational choice for both the proposer and the responder who can accept or reject the offer?
No logical outcome exists
A 75% to 25% division
A 99% to 1% split
A 1% to 99% allocation
An equal 50% to 50% share
10.
According to the pairwise majority rule, when voters choose the option closest to their ideal point, which statement is correct?
The option reflecting the mean preference is selected
No definite winner emerges because of Arrow’s Impossibility Theorem
The choice favored by the median voter prevails
The alternative supported by the largest group of voters wins
11.
Which of the following is not considered a necessary criterion for an ideal voting system?
The candidate preferred by the median voter must always be the winner
There should be no single individual with dictatorial control
The outcome should not be influenced by irrelevant alternatives
Preferences must be consistently ordered (transitive)
The system must satisfy unanimity
12.
According to Figure 1, what percentage of people choose candidate A when the options are limited to A and B?
Seventy-five percent
Thirty-five percent
Sixty percent
Forty percent
Twenty-five percent
13.
Which concept is illustrated when a life insurance company requires Enzo to undergo a medical check-up before issuing a policy?
transitivity
impossibility
independence
unanimity
14.
Which of the following is not a strategy companies use to mitigate moral hazard issues in employee relationships?
Offering employees deferred payments like annual bonuses
Purchasing life insurance policies for their employees
Providing wages that exceed the market equilibrium
Installing covert surveillance cameras in the workplace
15.
Which of the following serves as an example of a signal used to convey private information?
Enzo selects a meaningful present specifically for Josephine.
Josephine completes her MBA at Harvard Business School.
Lexus promotes its vehicles during the football World Cup Final.
All of the above options are valid examples.
16.
Markus works as a travelling salesman for a clothing company. In this work arrangement, what role does Markus fulfill?
agent
principal
screening officer
signaling party
representative
17.
John opts to sell Jamil's car to avoid paying for its repairs. Shahab, not knowing about the car's issues, purchases it. What concept does this scenario illustrate?
hidden actions
adverse selection
moral hazard
adverse selection