Which of the following is a bribe but NOT a kickback as defined in the posted PPT? O All of the other four are examples of Kickbacks which are also bribes. . A police officer demands $100 payment from a driver in return for not giving a traffic ticket. O Pharmaceutical company pays a physician 10% of all money it receives from sales of a medicine which the doctor prescribes for their patients. O Student pays $1,000 to financial aid officer in order to receive $20,000 of financial aid from a college. A professor is paid half of all funds a publisher collects from students in their class for a required textbook. Which of the follow describes the basic problem of Adverse Selection? O It occurs "before the transaction," and is due to inherent unchanging characteristics of the agent. It occurs "after the transaction," and is due to inherent unchanging characteristics of the agent It occurs "after the transaction," and is due to a change in behavior of the agent. ( It occurs "before the transaction," and is due to a change in behavior of the agent. When the Chinese firm "eZubao" went bankrupt in 2016 it was called a "Ponzi scheme." It specialized in: O Health-Fitness studios. Multi-level marketing of consumer products. O Underwriting of new security offerings of high-technology firms. Peer-to-peer lending. What is the primary benefit of having CPA firms audit the financial documents of publicly traded firms? It gives investors confidence that the firm is truthful and potentially profitable, and so it is easier for firms to sell stock and get loans as a result. O. it eliminates the chance a firm will go bankrupt. It saves taxpayers money as then government intants don't need audit the documents. O It gives information on how to cut costs to the firm audited. George Akerloff focused the market for used cars and discussed an issue later generally called the "lemons problem." A "lemon" is a low quality used car, with the seller but not the potential buyer aware of this. Since sellers have more information about the quality of the car: O adverse selection causes an inefficiently large number of transactions to occur. O moral hazard causes an inefficiently small number of transactions to occur. O moral hazard causes an inefficiently large number of transactions to occur. O adverse selection causes an inefficiently small number of transactions to occur. Which of the following is not required for the "invisible hand" described by Adam Smith to benefit society? Property rights must be well defined. Both parties to a transaction must be rational and well informed. O Property rights must be clear and enforced by law O Both parties to a transaction must care about each other, and want to make the other person happy. Which of the following is NOT benefit of an incentive compatible contract? O Some borrowers may be able to get loan only because the contract reassures the lender of repayment. O Car drivers may get a lower insurance prem ium because of a larger deductible. O Fewer transactions bet Incipals and Agents will take place. The Principal can spend less monitoring and share some of this savings with the Agent. Which of the following is true in the principal agent model? O The principal has less information and may shirk by behaving in a way contrary to the agent's interest. O The agent has less information and may shirk by behaving in a way contrary to the principal's interest. The agent has more information and may shirk by behaving in a way contrary to the principal's interest. The principal has more information and may shirk by behaving in a way contrary to the agent's interest
