Top 80+ Solved MicroEconomics, Theory and Applications 2 MCQ Questions Answer
Q. A public good will probably:
a. be expensive in a free market
b. be overprovided in the free market
c. not be provided in the free market
d. has no opportunity cost
Q. Asymmetric information occurs when:
a. information is free
b. buyers and sellers have access to different information
c. community surplus is maximized
d. community surplus is minimized
Q. A situation where people who have taken out insurance behave more recklessly as a result isknown as:
a. asymmetric information.
b. bad luck.
c. adverse selection.
d. moral hazar
Q. An insurance company can protect itself from moral hazard by:
a. monitoring.
b. imposing an ‘excess’.
c. holding liquid assets
d. diversification
Q. Taking into account the utility of all persons in society is referred to as
a. a utilitarian social welfare function.
b. equalizing social welfare function.
c. an in-kind transfer.
d. a pareto equilibrium.
Q. When the average buyer of an insurance policy is likely to have higher risk than others in hisclass, this is known as
a. adverse selection.
b. moral hazard.
c. asymmetric information.
d. an hmo.
Q. Health care markets may be inefficient because of
a. poor information (‘ignorance’).
b. adverse selection.
c. moral hazard.
d. all of the above.
Q. The government can address by providing universal health insurance coverage and charginguniform premiums.
a. expected utility
b. asymmetric information
c. commodity egalitarianism
d. adverse selection
Q. When people behave in ways that involve increased risk because they have insurance, this isknown as
a. adverse selection.
b. moral hazard.
c. asymmetric information.
d. a hmo.
Q. Which of the following is not an assumption used in class for reaching the conclusion, usingutilitarian reasoning, that income should be divided equally:
a. everybody has the same utility function
b. there is a fixed amount of income to be divided
c. marginal utility is a diminishing function of income
d. some people are more productive than others
Q. In the economic analysis of the market for new drugs, it is critical to take into account
a. inefficiency from monopoly power granted by patents
b. inequity generated by drug makers charging more than a medication costs to make
c. incentives for innovation by inventing new drugs
d. all of the above
Q. Suppose that you have complete health insurance that covers all expenses. You will usemedical care up to the point where your:
a. total benefits equal the costs of providing the medical care.
b. marginal benefit is zero.
c. marginal benefit is equal to the marginal cost of the medical care.
d. marginal benefit is equal to the total costs of providing the medical care. as
Q. If the government subsidizes the health insurance costs of individuals because individuals donot sufficiently realize the importance of having health insurance, which of the following justifications for government intervention is being used?
a. high administrative costs
b. redistribution
c. ignorance
d. externalities
Q. Which of the following is a reason why employers are the predominant source of insurance?
a. insuring at the firm level reduces the extent to which insurance has moral hazard effects.
b. insuring at the firm level allows insurers to create large insurance pools with a predictable distribution of medical risk.
c. employee compensation in the form of medical expenditures is not taxed.
d. both b and c are correct.
Q. Adverse selection can occur when
a. all persons involved in a transaction have full information.
b. one person has information not available to others.
c. post-agreement incentives result in workers shirking.
d. nobody has any information about a particular product.