Review Questions:Principles of Microeconomics

These are a few review questions that have stumped me. Can anyone assist. Thanks!


If the seller knows more about the good than the buyer, there exists:  

a. an externality.  
b. asymmetric information.  
c. moral hazard.  
d. a public goods problem


If the market for used computers has only lemons (low-quality computers) then the market:  

a. is an example of a thick market.  
b. suffers from an adverse selection problem.  
c. is a type of monopoly.  
d. must be monopolistically competitive


Adverse selection in employment is more likely when:  

a. jobs require specific training.  
b. everyone is equally qualified for the job.  
c. people's abilities are easy to measure.  
d. people's abilities are difficult for potential employers to observe.


In a _____market there are few high-quality goods for sale while in a ____market there are many high-quality goods for sale.  

a. thin; thicker.  
b. thicker; thin.  
c. inefficient; efficient.  
d. weak; strong.  


Suppose buyers in the used car market are willing to pay $3,500 for a plum (high-quality) used car and $1,500 for a lemon (low-quality) used car. If buyers believe that 30% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?  

a. $2000  
b. $2500  
c. $2900  
d. $3500  


A market in which there are neither spillover benefits nor spillover costs is:  

a. efficient.  
b. in efficient.  
c. efficient but not equitable.  
d. impossible.  


The discoveries from space exploration are examples of:  

a. private goods.  
b. external goods.  
c. public goods.  
d. spillover goods.  


A college education generates:  

a. no benefits.  
b. only private benefits.  
c. only spillover benefits.  
d. both private and spillover benefits.  


Arranging matching charitable contributors will______ the free-rider problem and lead to a _____ level of contribution to the public good.

a. increase; smaller.  
b. increase; larger.  
c. reduce; smaller.  
d. reduce; larger.  


The theory of government that assumes that the goal of government is to make the government more efficient is called:  

a. public choice economics.  
b. the public interest view.  
c. the efficient markets hypothesis.  
d. the voter theory.