Asymmetric information: A. is an important explanation of the variation (or asym

Question

Asymmetric information:

A. is an important explanation of the variation (or asymmetric performance) of individuals on standardized tests.

B. refers to personal information (e.g., regarding gender or ethnicity) that a person is not obligated to reveal on a job application.

C. refers to information that would be relevant for an economic transaction and that is known only by some of the people involved in the transaction.

D. Is information that is protected by patents or copyrights.

Suppose you are going to receive $20,000 a year from now as a gift from your uncle. He offers you a side deal to take $19,000 now. Should you take this deal rather than waiting for a year if the interest rate is 5%

A. No.

B. No, but if the interest rate falls to 1%, I should take the deal.

C. No, I should never make the deal as long as the interest rate is positive.

D. Yes

Asymmetric information:

A. is an important explanation of the variation (or asymmetric performance) of individuals on standardized tests.

B. refers to personal information (e.g., regarding gender or ethnicity) that a person is not obligated to reveal on a job application.

C. refers to information that would be relevant for an economic transaction and that is known only by some of the people involved in the transaction.

D. Is information that is protected by patents or copyrights.

Suppose you are going to receive $20,000 a year from now as a gift from your uncle. He offers you a side deal to take $19,000 now. Should you take this deal rather than waiting for a year if the interest rate is 5%

A. No.

B. No, but if the interest rate falls to 1%, I should take the deal.

C. No, I should never make the deal as long as the interest rate is positive.

D. Yes

Explanation / Answer

1. C. refers to information that would be relevant for an economic transaction and that is known only by some of the people involved in the transaction.

2. A. No

$ 19,000 now will make $ 19,950 (19,000 X (1+0.05)) after one year. So we prefer to take $ 20,000 a year from now.

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