Consider a market in which some high-quality goods are sold, but not as many as if there was perfect information about the quality of the good. This type of market is known as a:
A) beneficial selection.
B) thin market.
C) symmetric market.
D) efficient market.
22) Asymmetric information occurs:
A) only in used good markets.
B) only in new good markets.
C) in the markets for new and used goods.
D) only in public good markets.
23) Recall the application about baseball pitchers. If professional pitchers who are a free agent and are more likely to get injured switch teams more often and others who are less likely to get injured don't. why is the puzzling feature of the free-agent market for baseball players explained by asymmetric information?
A) The coaches, physicians, and trainers from the player's original team have interacted with the player for years and know if player is likely to suffer from injuries. The new team has the same information because they can check the league records.
B) The coaches, physicians, and trainers from the player's original team have interacted with the player on a daily basis for years and know if player is likely to suffer from injuries. The new team has less information because they have not interacted with the player daily.
C) The coaches, physicians, and trainers from the player's new team have not interacted with the player on a daily basis for years and don't know if player is likely to suffer from injuries but have the league records that contain all the information that the new team needs to determine if the pitcher is a lemon or plum.
D) There is a perfect amount of information for the pitcher and the new team.
24) Recall the application about the market for free-agent pitchers and how they are similar to used cars. In the market for used baseball pitchers:
A) free agency has eliminated the adverse selection problem.
B) pitchers who switch teams are generally healthier than those who do not.
C) asymmetric information leads to adverse selection.
D) both A and B
25) The adverse selection problem happens when an informed buyer or seller must choose from an undesirable selection of goods.
26) Asymmetric information occurs if John who is buying Kim's used Toyota Corolla has the same amount of information as Kim.
27) Symmetric information occurs when both buyers and sellers have imperfect information.
28) According to studies, used pickup trucks less than 10 years old that are being sold are less reliable than those not being sold.
29) Suppose that in a small town 40 used cars are sold each month. Of the 40 cars sold, 30 are lemons and 10 are plums. If consumers expect 50% of the used cars sold to be lemons, this market is in equilibrium.
30) Suppose that in a small town 40 used cars are sold each month. Of the 40 cars sold, 30 are lemons and 10 are plums. If consumers expect 50% of the used cars sold to be lemons, we can expect the price that buyers are willing to pay to fall over time.
31) The result of adverse selection is that the presence of high-quality goods in the market drive low-quality goods out of the market.
32) A mixed market exists when goods of different qualities are sold for the same price.
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