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Title: Which of the following were discovered in a Federal Trade Commission Study of 8,000 new and used Corvettes sold on eBay

Question Details

Question 1 

Q: Which of the following were discovered in a Federal Trade Commission Study of 8,000 new and used Corvettes sold on eBay between 2001 and 2003?


* The last-minute bids on new Corvettes were higher than that on used ones.

* The median winning bid on new Corvettes exceeded that on used ones.

* The median winning bid on used Corvettes exceeded that on new ones.

* The last-minute bids on used Corvettes were higher than that on new ones.








Question 2 

Q: Which of the following situations can lead to a winner’s curse?


* A bid which is won by multiple bidders but fails to cover the expectations of the seller.

* A win which makes a player over-enthusiastic about further gambles.

* An overoptimistic bid which helps the bidder to win but fails to cover his costs.

* A win which makes the player risk-averse toward future gambles.








Question 3 

Q: The _____ clause in an insurance policy relieves the insurer of responsibility to pay for policyholder’s losses below a pre-specified amount.


* propitious selection

* coinsurance

* vigilance

* deductible








Question 4 

Q: The effects of asymmetric information in the car market can be weakened by:


* providing a warranty for the product.

* purchasing business interruption insurance.

* inserting a “buyer beware” clause in the agreement.

* buying a “put” option.








Question 5 

Q: Which of the following problems associated with asymmetric information can be avoided by using a product warranty?


* Lemons problem

* Problem of adverse selection

* Moral Hazard

* Problem of blind sight







Question 6 

Q: If a purchase contract allows a buyer to accept less than a specified maximum "take" each month, buying a _____ would allow the seller to resell the excess at a _____ price.


* put option; profitable

* put option; predictable

* call option; predictable

* call option; profitable







Question 7 

Q: An insured person’s incentive to behave in ways that raise the probability of a claim is known as:


* a moral hazard.

* the lemons problem.

* the problem of adverse selection.

* the problem of advantageous selection.







Question 8 

Q: Which of the following is an example of a moral hazard?


* A student committing suicide after failing in an examination.

* A housekeeper leaving a house unlocked after insuring it against burglary.

* An exporter delivering faulty products after receiving a certain fraction of the total payment.

* A person deriving utility from a commodity without paying for it.







Question 9 

Q: Which of the following practices of insurers deter moral hazard?


* Setting a uniform premium structure.

* Requiring people to purchase the same coverage.

* Arranging for reinsurance to cut the risk of unexpectedly large claims.

* Conducting security checks without notice and terminating the policy whenever required.







Question 10 

Q: Which of the following can be a solution to the lemons problem?


* Providing testimonials from previous buyers.

* Providing accessories to be used in the car.

* Providing discount on the purchase of a car.

* Providing a warranty that covers the costs of certain repairs.







Question 11 

Q: DTC contracts which prohibit buyers from inspecting diamonds in advance help to minimize:


* the problem of moral hazard.

* the cost of gathering duplicative information.

* the problem of adverse selection.

* the winner’s curse.







Question 12 

Q: An individual will be considered risk neutral if:


* he is indifferent between taking and not taking up the gamble.

* he pays someone to take away the gamble from him.

* he pays someone to allow him to take the gamble.

* he takes up the gamble under any situation.







Question 13 

Q: Which of the following is an example of a non-price provision in an automobile insurance contract that can reduce moral hazard?


* A provision specifying that coverage is limited to 75 percent of the total damages caused by an accident.

* A provision that disallows medical claims by drunk drivers involved in accidents.

* A provision that restricts accident compensation to claims over $1,000.

* A provision requiring that the insured car carry certain safety devices like air bags.







Question 14 

Q: Which of the following is an example of asymmetric information?


* A student adopting unfair means to complete his/her assignment.

* A commodity trader buying goods at a low price and selling them off at a high price.

* A builder selling houses built on property that is zoned for industrial use.

* A buyer paying a pre-contracted price which is lower than the current market price.







Question 15 

Q:      Which of the following risks will always be insured in a business?


* Bad debts recorded in the company accounts

* Vital inputs required for daily production

* High-end technology based products

* Inventory stocked up in the storehouses.







Question 16 

Q: In which of the following areas are partnerships common?


* Contract jobs won through bidding

* A large multinational corporation

* Small firms producing semi-finished goods

* Professional group practices







Question 17 

Q: Directors can make opportunistic choices to advance their personal interest when:


* they plan to sell off the corporation stocks at inflated prices.

* they hold majority of the stocks in the corporation.

* they are aware that the cost of forming a new board of directors is high.

* their personal returns from the well being of the corporation is high.







Question 18 

Q: In a _____ the outsider buys the shares with debt collateralized by its other assets, and sometimes also by the target’s assets.


* merger

* cash tender

* proxy fight

* leveraged buyout







Question 19 

Q: In business organizations, the specialization of workers and their assignments to different tasks is called:


* division of labor.

* capital efficiency.

* product differentiation.

* labor productivity.







Question 20 

Q: A person who performs supervisory activities will also be a  _____ if she/he is financially responsible for investment and other contracted decisions.


* residual claimant

* director

* shareholder

* financial advisor







Question 21 

Q: _____ are legal and contractual mechanism[s] for creating and operating a business for profit, using capital from investors that will be managed on their behalf by directors and officers.


* Sole proprietorships

* Partnerships

* Joint-ventures

* Corporations







Question 22 

Q: If the owners of different types of resources, which are combined to produce an output, agree on organizational relationships that define their responsibilities toward one another they have formed a  _____.


* group

* company

* distribution network

* team







Question 23 

Q:    A _____ puts the assets of two corporations under a common management.


* acquisition

* vertical integration

* merger

* proxy fight







Question 24 

Q: A _____ requires workers to comply with orders from a boss, who need not consult them when making decisions, and to be paid for their cooperation.


* residual claimant

* hierarchy

* shareholder

* cooperative







Question 25 

Q: Which of the following could a corporation use to raise its initial operating capital?


* Government loans with low interest rates

* Mortgages from banks

* Public offering of stock

* Loans from the informal market at a high rate of interest







Question 26 

Q:    Creditors supply loans to sole proprietors at a high rate of interest because of:


* their low profit expectancy from this business.

* frequent experience of loan default.

* their inability to call in their loans or sell them to others.

* their general risk-averse nature.







Question 27 

Q: Which of the following risks cannot be hedged by an insurance?


* Exports damaged during shipment

* Theft during movement of goods

* An electrical fire at a warehouse

* Decreased sales resulting from poor salesmanship







Question 28 

Q: When a single individual performs all the steps involved in the production process he/she incurs:


* the costs of labor division.

* the costs of being a generalist.

* the cost of specialization.

* the costs of over-utilization of resources.







Question 29 

Q: Risk-averse people cut their risks by:


* diversifying their wealth into physical assets.

* investing their wealth into similar kinds of assets.

* investing their wealth only in risk-free assets.

* diversifying their wealth into different assets.







Question 30 

Q: An outside organization trying to gain control of a corporation offers a _____ by announcing its intent to purchase up to a certain number of the target's shares at a premium over their market price.


* proxy fight

* cash tender

* junk bond

* leveraged buyout

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Title: Which of the following were discovered in a Federal Trade Commission Study of 8,000 new and used Corvettes sold on eBay

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