Question 1

Credit Union members who insure their mortgage debt to off-set the risk of loss of life will all ___________________________, and a Credit Union whose insured member suffers this type of loss will ________________________.

Accepted Answer

A)   require eligibility certification from a state health authority; apply for benefits
B)   make regular premium payments; receive payment to retire that insured debt
C)   be in the same group of people; receive refund of insurance premiums
D)   be in a similar group of people; receive payment and a refund of premiums.E) A) and C)
F) All of the above

Question 2

The chef at a high-end French cuisine restaurant has accepted a job on a cruise liner. The restaurant owner must advertise for a replacement chef, but is concerned about reducing the amount of imperfect information respondents to the career ad will provide. This concern can best be addressed by

Accepted Answer

A)   requiring current resumes and recommendations.
B)   requiring a detailed job history.
C)   stipulate a three-month trial period as a hiring condition.
D)   offer to hire on a weekly renewable contract.E) B) and C)
F) B) and D)

Question 3

In the labor market, a stipulation that the first three months of employment is a trial period is

Accepted Answer

A)   a standard precaution against hiring a lemon.
B)   a precondition to certification in labor.
C)   waived when school transcripts are submitted with a resume.
D)   a way of classifying potential employees.E) C) and D)
F) All of the above

Question 4

If insurance premiums are going to be set below the actuarially fair level for a certain group, who will likely be targeted to make up the difference?

Accepted Answer

A)   government regulators and taxpayers
B)   insurance company shareholders
C)   other buyers of insurance
D)   taxpayers or other buyers of insuranceE) A) and B)
F) A) and C)

Question 5

_____________________ cannot be eliminated, but it can often be managed.

Accepted Answer

A)   Imperfect selection
B)   Imperfect information
C)   Adverse selection
D)   Adverse informationE) All of the above
F) A) and D)

Question 6

_____________________ have incentives to create mechanisms that will allow them to make mutually beneficial transactions even in the face of _____________________.

Accepted Answer

A)   Manufacturers; adverse selection
B)   Buyers and sellers; imperfect information
C)   Retailers; adverse selection
D)   Retailers; imperfect informationE) A) and B)
F) A) and C)

Question 7

__________ is something valuable that a lender would have a right to________________ if the loan is not repaid.

Accepted Answer

A)   Collateral; sue for
B)   A guarantee; seize and retain
C)   A guarantee; sell
D)   Collateral; seize and sellE) B) and D)
F) A) and B)

Question 8

Changes in weather patterns are increasing administrative costs for insurance companies. These added costs often exceed the amount of the premiums coming in and claim payments going out. To address this problem, insurance companies typically

Accepted Answer

A)   increase dividend payments to shareholders.
B)   deny weather related claims for property damage.
C)   increase their investment income.
D)   build up the amount of their reserves.E) None of the above
F) C) and D)

Question 9

Briefly explain what is meant by the term "service contract" and provide an example.

Accepted Answer

A service contract requires a buyer to p...

Question 10

A ________________________ is a form of incentive to purchase a product on a 30 day trial basis.

Accepted Answer

A)   replacement guarantee
B)   warranty
C)   money-back guarantee
D)   service contractE) All of the above
F) A) and B)

Question 11

What do service contracts, occupational licenses and cosigners all share in common?

Accepted Answer

A)   reduced risk of adverse selection
B)   reduced the risk of imperfect information
C)   eliminate the risk of adverse selection
D)   eliminate the risk of imperfect informationE) B) and D)
F) A) and D)

Question 12

Which of the following would be the most beneficial to an internet retailer?

Accepted Answer

A)   reputation for high-priced, quality products
B)   reputation for quality and free shipping
C)   money-back guarantee combined with a reputation for quality
D)   warranty against product defects and a reputation for low pricesE) None of the above
F) C) and D)

Question 13

With regard to the provision of health insurance in the United States, which of the following is regarded as a way of addressing moral hazard and adverse selection problems?

Accepted Answer

A)   reducing profit margins for insurance companies
B)   increasing profit margins for insurance companies
C)   reduced government involvement
D)   greater government involvementE) All of the above
F) A) and B)

Question 14

Contrast fee-for-service health care and a health maintain organization.

Accepted Answer

Under fee-for-service healthcare, medica...

Question 15

In the case of insurance, _______________ arises because the buyers of insurance have more information about _____________________than the insurance company does.

Accepted Answer

A)   moral hazard; their risk rating
B)   actuarial prices; their high-risk or low-risk status
C)   adverse selection; the risk group they belong to
D)   fundamental laws; actuarial fairnessE) C) and D)
F) B) and D)

Question 16

A ___________________ arrangement exists when medical care providers are paid according to the services they provide.

Accepted Answer

A)   fee-for-service
B)   service contract
C)   coinsurance
D)   insuranceE) C) and D)
F) B) and D)

Question 17

What do an optician and a lawyer share in common?

Accepted Answer

A)   government regulators require that each must guarantee their services
B)   each must warranty their services
C)   each must provide a money-back guarantee
D)   need for a valid occupational license from government regulatorsE) All of the above
F) C) and D)

Question 18

In the U.S., individuals often pay a small portion of their earnings into a state _________________ pooled fund that will compensate them if they are injured on the job.

Accepted Answer

A)   medicare
B)   social Security
C)   workman's compensation insurance
D)   unemployment insuranceE) A) and D)
F) A) and B)

Question 19

If a website facilitates the sale of goods by individuals and businesses over the internet, but requires actual photos of every item for sale to be posted instead of a manufacturer's stock picture of the product, demand for that product will likely ___________ due to the improved information, causing quantity to ___________ .

Accepted Answer

A)   increase, increase
B)   decrease, increase
C)   increase, decrease
D)   decrease, decreaseE) All of the above
F) B) and C)

Question 20

Of 1000 homeowners insured with Crown Insurance, 250 live in a flood plain, 150 live in an area with frequent tornadoes, 100 live in earthquake prone regions, and the remaining 500 reside in small communities located in less hazardous regions. Which of the following will likely apply to the low-risk group of homeowners?

Accepted Answer

A)   the low and medium-risk groups will pay less than the high-risk group
B)   those in the low-risk group will pay less than both the medium-risk and high-risk group
C)   those in the low-risk group will be discouraged from buying home insurance.
D)   they must buy insurance and pay more than the actuarially fair amount for their risk groupE) B) and C)
F) A) and B)

Exam 16: Information, Risk, and Insurance

_ have incentives to create mechanisms that will allow them to make mutually beneficial transactions even in the face of _.

Correct Answer
verified

is something valuable that a lender would have a right to______ if the loan is not repaid.

Correct Answer
verified

What do an optician and a lawyer share in common?

Correct Answer
verified

_____________________ cannot be eliminated, but it can often be managed.

Correct Answer
verified

Changes in weather patterns are increasing administrative costs for insurance companies. These added costs often exceed the amount of the premiums coming in and claim payments going out. To address this problem, insurance companies typically

Correct Answer
verified

Contrast fee-for-service health care and a health maintain organization.

Correct Answer
verified
Under fee-for-service healthcare, medica...
View Answer

Credit Union members who insure their mortgage debt to off-set the risk of loss of life will all ___, and a Credit Union whose insured member suffers this type of loss will .

Correct Answer
verified

In the case of insurance, _ arises because the buyers of insurance have more information about _______than the insurance company does.

Correct Answer
verified

What do service contracts, occupational licenses and cosigners all share in common?

Correct Answer
verified

The chef at a high-end French cuisine restaurant has accepted a job on a cruise liner. The restaurant owner must advertise for a replacement chef, but is concerned about reducing the amount of imperfect information respondents to the career ad will provide. This concern can best be addressed by

Correct Answer
verified

Correct Answer
verified

Which of the following would be the most beneficial to an internet retailer?

Correct Answer
verified

With regard to the provision of health insurance in the United States, which of the following is regarded as a way of addressing moral hazard and adverse selection problems?

Correct Answer
verified

A ________________________ is a form of incentive to purchase a product on a 30 day trial basis.

Correct Answer
verified

If insurance premiums are going to be set below the actuarially fair level for a certain group, who will likely be targeted to make up the difference?

Correct Answer
verified

In the U.S., individuals often pay a small portion of their earnings into a state _________________ pooled fund that will compensate them if they are injured on the job.

Correct Answer
verified

In the labor market, a stipulation that the first three months of employment is a trial period is

Correct Answer
verified

A ___________________ arrangement exists when medical care providers are paid according to the services they provide.

Correct Answer
verified

Briefly explain what is meant by the term "service contract" and provide an example.

Correct Answer
verified
A service contract requires a buyer to p...
View Answer

Correct Answer
verified

Exam 16: Information, Risk, and Insurance

_____________________ have incentives to create mechanisms that will allow them to make mutually beneficial transactions even in the face of _____________________.

Correct AnswerverifiedShow Answer

__________ is something valuable that a lender would have a right to________________ if the loan is not repaid.

Correct AnswerverifiedShow Answer

What do an optician and a lawyer share in common?

Correct AnswerverifiedShow Answer

_____________________ cannot be eliminated, but it can often be managed.

Correct AnswerverifiedShow Answer

Changes in weather patterns are increasing administrative costs for insurance companies. These added costs often exceed the amount of the premiums coming in and claim payments going out. To address this problem, insurance companies typically

Correct AnswerverifiedShow Answer

Contrast fee-for-service health care and a health maintain organization.

Correct AnswerverifiedUnder fee-for-service healthcare, medica...View AnswerShow Answer

Credit Union members who insure their mortgage debt to off-set the risk of loss of life will all ___________________________, and a Credit Union whose insured member suffers this type of loss will ________________________.

Correct AnswerverifiedShow Answer

In the case of insurance, _______________ arises because the buyers of insurance have more information about _____________________than the insurance company does.

Correct AnswerverifiedShow Answer

What do service contracts, occupational licenses and cosigners all share in common?

Correct AnswerverifiedShow Answer

The chef at a high-end French cuisine restaurant has accepted a job on a cruise liner. The restaurant owner must advertise for a replacement chef, but is concerned about reducing the amount of imperfect information respondents to the career ad will provide. This concern can best be addressed by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would be the most beneficial to an internet retailer?

Correct AnswerverifiedShow Answer

With regard to the provision of health insurance in the United States, which of the following is regarded as a way of addressing moral hazard and adverse selection problems?

Correct AnswerverifiedShow Answer

A ________________________ is a form of incentive to purchase a product on a 30 day trial basis.

Correct AnswerverifiedShow Answer

If insurance premiums are going to be set below the actuarially fair level for a certain group, who will likely be targeted to make up the difference?

Correct AnswerverifiedShow Answer

In the U.S., individuals often pay a small portion of their earnings into a state _________________ pooled fund that will compensate them if they are injured on the job.

Correct AnswerverifiedShow Answer

In the labor market, a stipulation that the first three months of employment is a trial period is

Correct AnswerverifiedShow Answer

A ___________________ arrangement exists when medical care providers are paid according to the services they provide.

Correct AnswerverifiedShow Answer

Briefly explain what is meant by the term "service contract" and provide an example.

Correct AnswerverifiedA service contract requires a buyer to p...View AnswerShow Answer

Correct AnswerverifiedShow Answer

_ have incentives to create mechanisms that will allow them to make mutually beneficial transactions even in the face of _.

Correct Answer
verified

is something valuable that a lender would have a right to______ if the loan is not repaid.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Under fee-for-service healthcare, medica...
View Answer

Credit Union members who insure their mortgage debt to off-set the risk of loss of life will all ___, and a Credit Union whose insured member suffers this type of loss will .

Correct Answer
verified

In the case of insurance, _ arises because the buyers of insurance have more information about _______than the insurance company does.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A service contract requires a buyer to p...
View Answer

Correct Answer
verified