Lesson 1.3.4

1.3.4 Information gaps Quiz: Pearson Edexcel Economics, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 1.3.4, Information gaps: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 1: Theme 1: Introduction to markets and market failure, written with Revision Ninja.

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The 20 questions

  1. What occurs when one economic agent has more market information than another?

    • Bounded rationality
    • Asymmetric information
    • Symmetric information
    • Moral hazard

  2. A used-car seller knows more about vehicle defects than the buyer. What is this called?

    • Symmetric information
    • Asymmetric information
    • Government failure
    • Moral hazard

  3. What is the main market failure outcome of imperfect consumer information about merit goods?

    • Over-production
    • Excess supply
    • Under-consumption
    • Productive inefficiency

  4. Which market is most affected by asymmetric information regarding individual risk levels?

    • Unskilled labour
    • Health insurance
    • Foreign exchange
    • Wheat commodity

  5. What type of market failure occurs when high-risk individuals are most likely to buy insurance?

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

  6. What arises when an insured person takes greater risks because they are financially protected?

    • Asymmetric cost
    • Adverse selection
    • Moral hazard
    • Free-rider problem

  7. A bank lends without credit checks, attracting mostly high-risk borrowers. What is this called?

    • Adverse selection
    • Free-rider problem
    • Moral hazard
    • Government failure

  8. What government intervention directly resolves information gaps in product safety?

    • Information provision
    • Indirect taxation
    • State production
    • Maximum prices

  9. In the second-hand car market with asymmetric information, what happens to high-quality sellers?

    • Increase prices
    • Lower production costs
    • Exit the market
    • Dominate supply

  10. Why do consumers under-consume health check-ups due to imperfect information?

    • Underestimating costs
    • Underestimating benefits
    • Overestimating costs
    • Overestimating benefits

  11. Which market commonly suffers from imperfect information regarding long-term health risks?

    • Fresh tap water
    • Solar panels
    • Fast food
    • Commercial flights

  12. In medical consultations, who typically holds superior information about treatment risks?

    • The patient
    • The government
    • The receptionist
    • The doctor

  13. What private market mechanism helps reduce information gaps for consumers online?

    • Customer reviews
    • Price ceilings
    • Production quotas
    • Indirect taxes

  14. What phenomenon occurs when asymmetric information drives high-quality goods out of a market?

    • Moral hazard
    • Market failure
    • Free rider problem
    • Adverse selection

  15. How can firms selling complex goods increase consumer demand by closing information gaps?

    • Creating moral hazard
    • Eliminating production costs
    • Raising market prices
    • Building consumer trust

  16. What is the main market consequence of consumers making decisions based on imperfect information?

    • Excess demand
    • Government failure
    • Misallocation of resources
    • Decreased supply

  17. Which process do insurance companies use to reduce adverse selection among applicants?

    • Screening
    • Moral hazard
    • Regulation
    • Subsidisation

  18. Which government policy directly addresses information gaps in consumer product markets?

    • Mandatory labelling
    • Maximum prices
    • Indirect taxation
    • Pollution permits

  19. What term describes a situation where buyers and sellers have identical information about a product?

    • Asymmetric information
    • Adverse selection
    • Symmetric information
    • Moral hazard

  20. What term describes an individual taking greater risks because they are protected by insurance?

    • Asymmetric information
    • Free rider problem
    • Moral hazard
    • Adverse selection

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