1. One reason unemployed people have a harder time getting hired than do similar
ID: 1225288 • Letter: 1
Question
1. One reason unemployed people have a harder time getting hired than do similar employed workers is because looking for a new job is:
A) adverse selection.
B) signaling. (incorrect answer)
C) moral hazard.
D) the principal-agent problem.
2. If some used car sellers will sell their good-quality used car even when the price offered is low, then:
A) the price of used cars will decrease. (incorrect answer)
B) low-quality used cars will not sell.
C) sellers of low quality cars will have to sell at a lower price.
D) the price of used cars will increase.
3. . The overrating of mortgage-backed securities prior to the financial crash of 2007–2009 was generally attributed to:
A) the fact that customers desiring the ratings paid for them.
B) the fact that the sellers of the securities paid for the ratings.
C) overzealousness in the securities market. (incorrect answer)
D) the wave of foreclosures prior to and during the financial crash.
4. The adverse selection death spiral in health insurance can be prevented by:
A) selling health insurance plans to groups, such as through the workplace. (incorrect answer)
B) requiring people to only purchase health insurance in individual policy markets.
C) requiring health exams prior to issuing a policy and charging higher prices to healthy people.
D) making policy buyers aware of the potential for the death spiral.
Explanation / Answer
1 D)
Because most of the unemployed has a unemployment benefit that is paid to them, They might loose it if they get job
2 C)
Sellers of low quality cars have no choice but to decrease price
3 D)
Mortgage backed securities come into market only because of one reason there are foreclosures
4 C)
The only way health insurance companies can be profitable is to know what is the current health of the person they are insuring.
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