4.1.2.2 Imperfect information Quiz: AQA Economics, Unit 1

The 20 questions

1. What occurs when economic agents lack full and accurate knowledge needed for rational choices?

   • Asymmetric information
   • Bounded rationality
   • Imperfect information
   • Moral hazard

2. What term describes a market transaction where one party possesses more knowledge than the other?

   • Imperfect information
   • Symmetric information
   • Asymmetric information
   • Bounded rationality

3. In a second-hand car market, who typically holds superior information about the vehicle's true condition?

   • The seller
   • The insurer
   • The buyer
   • The manufacturer

4. Why can imperfect information lead to market failure?

   • Misallocation of resources
   • Equal wealth distribution
   • Monopoly profits
   • Zero transaction costs

5. Which market issue arises when high-risk individuals are most likely to buy insurance?

   • Negative externality
   • Bounded rationality
   • Moral hazard
   • Adverse selection

6. A bank lending money to borrowers without knowing their true risk of default faces:

   • Perfect information
   • Symmetric information
   • Productive inefficiency
   • Asymmetric information

7. Which measure reduces asymmetric information in the second-hand car market?

   • Vehicle history reports
   • Price ceilings
   • Production subsidies
   • Advertising bans

8. What does accurate market information enable economic agents to make?

   • External benefits
   • Guaranteed profits
   • Rational decisions
   • Perfect predictions

9. What is the main consequence for a consumer who buys goods with imperfect information?

   • Utility maximisation
   • Higher income
   • Price stability
   • Welfare loss

10. Which classic market is frequently used to illustrate asymmetric information?

    • Bottled water
    • Second-hand cars
    • Fresh fruit
    • Flat-screen televisions

11. What is a major limitation of using government regulation to correct imperfect information?

    • Guaranteed efficiency
    • Perfect transparency
    • Complete price stability
    • High intervention costs

12. What concept describes a situation where a firm knows more about product safety than consumers do?

    • Perfect information
    • Asymmetric information
    • Moral hazard
    • Bounded rationality

13. How does imperfect information typically affect resource allocation in a market?

    • Misallocation of resources
    • Market equilibrium
    • Productive efficiency
    • Optimal resource allocation

14. Who holds superior knowledge about individual risk in an insurance market?

    • The insurer
    • The regulator
    • The policyholder
    • The underwriter

15. What action can consumers take to reduce asymmetric information before purchasing goods?

    • Comparing product reviews
    • Banning advertising
    • Increasing consumption
    • Ignoring price signals

16. What exists when all buyers and sellers have complete market knowledge?

    • Asymmetric information
    • Market failure
    • Perfect information
    • Bounded rationality

17. Which type of economic efficiency is directly reduced by imperfect information in a market?

    • Dynamic efficiency
    • Technical efficiency
    • Allocative efficiency
    • Productive efficiency

18. What market outcome occurs when buyers cannot distinguish between high and low-quality goods?

    • Moral hazard
    • Perfect competition
    • Price discrimination
    • Adverse selection

19. In a labour market, who usually possesses superior information about a job applicant's true productivity?

    • The recruitment agency
    • The worker
    • The trade union
    • The employer

20. What function does a warranty provide to buyers in a market with imperfect information?

    • Price control
    • Quality signal
    • Production quota
    • Tax exemption

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