Lesson 2.9.1

2.9.1 Information failure, asymmetric information and moral hazard Quiz: OCR Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 2.9.1, Information failure, asymmetric information and moral hazard: 20 multiple choice questions for the OCR Economics (H460), Unit 2: The role of markets, written with Revision Ninja.

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The 20 questions

  1. What exists when economic agents have access to full and equal market information?

    • Imperfect information
    • Moral hazard
    • Symmetric information
    • Asymmetric information

  2. Which term describes a market situation where one party holds more information than another?

    • Perfect competition
    • Symmetric information
    • Moral hazard
    • Asymmetric information

  3. A driver with full insurance drives recklessly because damage costs are covered. What is this?

    • Adverse selection
    • Moral hazard
    • Market rigging
    • Price discrimination

  4. High-risk individuals being more likely to purchase health insurance policies demonstrates which market problem?

    • Adverse selection
    • Free rider problem
    • Moral hazard
    • Principal-agent problem

  5. Which economist introduced the concept of asymmetric information using the second-hand car market?

    • Friedrich Hayek
    • Adam Smith
    • George Akerlof
    • John Maynard Keynes

  6. In Akerlof's lemons model, what happens to high-quality goods due to asymmetric information?

    • Driven out
    • Subsidised heavily
    • Overpriced
    • Overproduced

  7. Which problem arises when a manager acts in their own interest rather than the owner's?

    • Free-rider problem
    • Paradox of thrift
    • Principal-agent problem
    • Tragedy of commons

  8. A bank takes excessive financial risks expecting government bailouts if investments fail. What is this?

    • External cost
    • Moral hazard
    • Adverse selection
    • Regulatory capture

  9. An employee slackening off work because the employer cannot constantly monitor them demonstrates what problem?

    • Moral hazard
    • Irrationality
    • Adverse selection
    • Negative externality

  10. Which market mechanism helps sellers signal product quality to potential buyers with less information?

    • Maximum price caps
    • Guarantees and warranties
    • Ad valorem taxes
    • Minimum wage laws

  11. A job applicant obtains a university degree primarily to demonstrate high capability to employers. What is this?

    • Screening
    • Signalling
    • Regulatory capture
    • Moral hazard

  12. An insurance firm requires medical checks before selling a life policy. What is this process?

    • Moral hazard
    • Screening
    • Signalling
    • Profit maximising

  13. How does asymmetric information cause market failure in competitive private markets?

    • Guaranteed economic profit
    • Zero consumer surplus
    • Misallocation of resources
    • Price stability

  14. Which type of good is typically underconsumed because consumers lack full information on its benefits?

    • Inferior good
    • Public good
    • Merit good
    • Demerit good

  15. Which government intervention directly addresses consumer information failure regarding product health risks?

    • Minimum price controls
    • Mandatory nutritional labelling
    • Subsidising sugar producers
    • Trade tariffs

  16. At what stage of an economic transaction or contract does adverse selection occur?

    • During payout
    • After signing
    • Upon contract expiry
    • Before signing

  17. At what stage of an economic agreement or contract does moral hazard typically occur?

    • Prior to bidding
    • Before signing
    • During negotiation
    • After signing

  18. What type of good is overconsumed because consumers underestimate its long-term personal harm?

    • Merit good
    • Giffen good
    • Demerit good
    • Public good

  19. Why does making health insurance compulsory for all citizens eliminate adverse selection?

    • Ends moral hazard
    • Pools low-risk consumers
    • Eliminates doctor fees
    • Removes insurance claims

  20. A buyer cannot distinguish between good cars and lemons. What price will they offer?

    • Maximum premium price
    • Zero pounds
    • Average market value
    • Brand new price

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