Answer the multiple-choice questions; provide a very briefexplanation.

(1) eBay has a seller reputation system to provide
(A) consumers with a signal concerning seller quality.
(B) sellers a chance to signal other sellers concerning theirquality.

(C) improvements in investor relations.
(D) a reduction in monopoly power.

(2) If a life insurance company does not require a medical examof its policyholders, it is most likely that the company
(A) charges higher premiums than those companies that require amedical exam.
(B) charges lower premiums than those companies that require amedical exam.

(C) charges no premiums at all.
(D) has only very healthy policyholders.

(3) If a student achieves a high GRE score, this
(A) sends a signal to a program that the applicant will be a goodcollege student.

(B) is an example of adverse selection.
(C) is an example of moral hazard.
(D) provides a program with no information.

(4) In a market with positive externalities,
(A) the efficient level of production is less than what competitionwill obtain.

(B) the efficient level of production is more than whatcompetition will obtain

(C) the efficient level of production is equal to whatcompetition will obtain.

(D) there cannot be an efficient level of production.

(5) The Net Present Value approach to investment results in aninvestment being undertaken only if

(A) its net present value is positive.
(B) its opportunity cost is positive.
(C) its net present value is zero.

(D) interest rates are low.
(E) its opportunity cost is zero. (F) interest rates are high.

Answer rating: 100% (QA)

1 Option A is correct EBay has a seller reputation system to provide a consumer with a signal concer... View the full answer