ECO 550 Week 8 Quiz

ECO 550 Week 8 Quiz in $12 only

Question 1

1.  People’s abilities to bear risk increases with:

their abilities to understand the market.

their abilities to diversify their asset holdings.

their abilities to invest in risky assets over a large time period.

their abilities to judge the probability of outcomes.

Question 2

1.  Which of the following actions can prevent migration of individuals from one health insurance policy to another?

Lowering the opportunity costs of switching from one policy to another.

Fixing a uniform premium rate for all individuals under one type of policy.

Conducting an interview of the people before placing them under different policies.

Setting up a norm requiring all individuals to purchase the same coverage.

Question 3

1.  In a principal/agent relationship, _____ can help to reduce the damage caused by a winner’s curse, provided both the parties are well-informed.

signals

warranties

disclosure

renegotiation

Question 4

1.  Which of following provisions in an insurance policy may be economically efficient if policy holders can control small claims but not large ones?

Vigilance provision

Non-price exceptions

Co-payment provisions

Liquidated damages

Question 5

1.  Which of the following is an example of a moral hazard?

A student committing suicide after failing in an examination.

A housekeeper leaving a house unlocked after insuring it against burglary.

An exporter delivering faulty products after receiving a certain fraction of the total payment.

A person deriving utility from a commodity without paying for it.