11. Limited liability (A) implies risk aversion; (B) creates both adverse selection and moral hazard in the financial markets; (C) is a non-manipulable mechanism; (D) none of the above. 12. Consider two groups of potential employees: 25% of them are able with productivity 80000 and 75% are unable with productivity 40000. The education y costs 7000 y for the able workers and 10000 y for the unable workers. Education does not affect productivity. Employers are perfectly competitive. Which of the following occurs in a pooling equilibrium in this economy? (A) All workers get two years in school and earn a salary of 60000 after that; (B) Firms do not take education into account and pay a salary of 50000 to all agents; (C) All workers get no education and earn a salary of 60000 after that; (D) none of the above. 13. Which of the following can occur in a separating equilibrium in this economy? (A) All workers get two years in school and get the salary of 60000 after that; (B) Firms do not take education into account and pay the salary of 50000 to all agents; (C) Able workers spend five years in college and get a salary of 80000 after that, and unable workers get a wage of 40000 without going to school; (D) none of the above. 14. Consider three bidders who have private values that are independently and uniformly dis- tributed between 0 and 100. Suppose that these values happen to be v1 = 60, v2 = 50, and v3 = 20. Then the equilibrium price in the second-price auction is (A) 40; (B) 50; (C) 60; (D) 30. 15. This equilibrium outcome can change if (A) the distribution of private values is not uniform; (B) a fourth bidder arrives, and his value is v4 = 30; (C) the three bidders collude before the auction; (D) all of the above. 16. The equilibrium price in the first-price auction is (A) 40; (B) 50; (C) 60; (D) 30.

17. The equilibria in these auctions (A) are all in dominant strategies; (B) exhibit Winners Curse; (C) on average, second-price auction generates higher equilibrium prices than the first-price; (D) none of the above. 18. Suppose that the distributions of the private values are not known in the previous example. Then one can still compute the equilibrium outcome in (A) the first-price and second-price auctions; (B) English and Dutch auctions; (C) the second-price and English auctions; (D) none of the above auctions. 19. Reserve prices (A) can raise the expected revenue; (B) can lower the expected revenue; (C) can produce inefficient outcomes; (D) all of the above. 20. Suppose that bidders are risk neutral and their private values are independently and uniformly distributed between 0 and 100. Then the average revenue is the greatest in the equilibrium in (A) the first-price auction; (B) the second-price auction with a small reserve price; (C) the second-price auction without a reserve; (D) the English auction.