Question

32) The market for used cars is used by the textbook to illustrate the problem of

	free riding
	adverse selection
	moral hazard
	negative externalities
	positive externalities

33) Moral hazard and adverse selection both arise from a more general phenomenon known as

	nonexcludability
	the free rider problem
	spillover effects
	rent-seeking
	asymmetric information

34) According to the textbook, which of the following are problems that complicate the interpretation of official data on the distribution of income?

	the quintiles contain unequal populations
	the people in each quintile do not work the same number of hours
	there is considerable upward income mobility over time
	All of the above
	None of the above

36) Assume that most people would prefer to see less poverty and so might be willing to give some of their income to help the poor. The idea that the free market might provide less redistribution than individuals would like is the basis for which justification for government involvement in income redistribution?

	relative inequality
	absolute equality
	public good-free rider
	veil-of-ignorance
	social-insurance

37) The closer the Gini Coefficient is to 1

	the steeper is the slope of the Lorenz curve
	the more poor people there are
	the higher the degree of income inequality
	the closer the Lorenz curve is to the Line of perfect equality
	the lower is the poverty rate

Answer 1

Ans.32- Adverse selection In adverse selection,there is infornation gap between the two parties involved in transaction.
Ans.33- asymmetric information
Ans.34- All of the above.There are many assumptions in compiling official data which are not true and skew the final result.
Ans.36- Social insurance
Ans.37- the closer the gini coefiicient to 1, the higher the degree of income inequality.

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