51.              In corporations, which of the following are agents but not principals? a. shareholders b. the board of directors c. managers d. workers 52.              In corporations, which of the following are principals but not…

 

51.              Which of these are principals and agents in corporations?

a.

Shareholders

b.

The Board of Directors

c.

Managers

d.

For workers

52.              What are the principals and agents in corporations?

a.

Shareholders

b.

The Board of Directors

c.

Managers

d.

For workers

53.              In order to generate revenue, insurance companies collect annual premiums. They then pay their customers for claims they make. The moral hazard issue (1) has it had an effect on how many policyholders file claims and (2) how does the average premium change when compared with a world without moral hazard?

a.

While the percentage of claimants is greater, average annual premiums tend to be lower.

b.

This is because the percentage of claimants on policies is less; however, average annual premiums tend to be lower.

c.

Higher claims rates mean higher average premiums.

d.

Although the claim percentage is smaller, premiums on average are higher.

54.              In order to generate revenue, insurance companies collect annual premiums. This is used to reimburse customers for any damages that they have suffered. Insurance companies can divide customers according to their moral hazard. Group 1: customers who file few claims & Group 2: customers that file a lot of claims. What happens to an average annual premium in a group after creating these groups?

a.

Group 1: Average annual premium rises

Group 2: Average annual premium rises

b.

Group 1: The average annual premium is decreasing

Group 2: Average annual premium rises

c.

Group 1: Annual average premium rises

Group 2: The average annual premium has fallen

d.

Group 1: The average annual premium is decreasing

Group 2: The average annual premium has fallen

55.              What is the characteristic of an organization but not a family-owned small business?

a.

Inputs are bought on the markets to produce factors.

b.

This firm is involved in the sale of output on markets that sell goods and services.

c.

The objective of maximizing profit is what guides the firm in making decisions.

d.

A principal-agent issue has been created for the company by the division of ownership and control.

56.              Averse selection is

a.

A person with poor supervision is more likely to be dishonest, or engage in other undesirable behaviors.

b.

A move taken by an inept party to get information from an informed one.

c.

Failure of the majority to vote in favor of society’s transitive preferences.

d.

The tendency to mix unobserved characteristics into something undesirable is the result of insufficient information.

57.              A statement of disclosure is required when homeowners decide to sell their house. It is the part of paperwork that homeowners must complete. This is where they are expected to disclose everything they have discovered about the property.  Statement of disclosures are used to attempt to resolve the problem.

a.

principal-agent problem.

b.

moral-hazard problem.

c.

adverse-selection problem.

d.

Signing a problem

58.              Which one of these is it? Not An example of an adverse selection issue?

a.

A refrigerator is purchased by a homeowner if it has been known to leak in the past.

b.

After a reduction in her salary, a highly productive worker decides to quit and find a better job.

c.

Major league baseball players perform poorly after being awarded a multi-million-dollar contract.

d.

Construction contractors may use lower quality materials, while charging for more expensive materials.

59.              Bob intends to sell the house. To cover the water spots from the roof leak, Bob paints the entire ceiling of his home to hide the problem. Here’s an example:

a.

moral hazard.

b.

screening.

c.

Unfavourable selection

d.

The principal-agent issue

60.              A negative selection could lead to

a.

Used car owners choose to keep their cars rather than selling them at a low price to satisfy skeptical buyers.

b.

The result is unemployment when wages are not at the right level to balance supply and demand.

c.

Low-risk buyers choose not to be insured because they feel the policies aren’t tailored to their needs.

d.

The above statements are true.

 

 

 

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