Jamil’s car needs repairs, so he sells it to avoid the repair bill. Shahab, unaware of the problem, buys it. What is this an example of?
Correct answer C. Adverse selection
Topic / 15 questions
Asymmetric Information MCQs
Asymmetric Information MCQs cover situations where one party in a transaction knows more than the other, leading to problems such as moral hazard and adverse selection, and responses such as signalling. They help economics students, CSS candidates and lecturer test takers. Every question shows its correct answer instantly, so you can check each concept.
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Markus works as a travelling salesman for a clothing company. What is Markus’s role in this employment relationship?
Correct answer D. Agent
Which of these is an example of a signal used to reveal private information?
Correct answer D. All of these answers are correct
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Which of these is NOT a method firms use to tackle moral hazard in the employment relationship?
Correct answer C. They buy life insurance on their workers
Which of these is NOT one of the properties required of a perfect voting system?
Correct answer D. The median voter always wins
Under pairwise majority voting, if each person votes for the option closest to their own preferred outcome, which statement holds?
Correct answer D. The outcome preferred by the median voter wins
In the ultimatum game, which split would be rational for both the proposer and the responder who must accept or reject it?
Correct answer A. 99/1
After a friend dies suddenly of a heart attack, Jamil rushes to his doctor for an expensive check-up. What does his reaction illustrate?
Correct answer B. People give too much weight to a small number of vivid observations
Which of these is a response to people behaving inconsistently over time?
Correct answer C. Forced contributions to a retirement plan
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Nicole wants to avoid buying a car that turns out to be a lemon, so she has her mechanic inspect the car before she buys it. What is this called?
Correct answer B. Screening
For a signal to reveal private information effectively, what must be true of it?
Correct answer A. It must be costly to the signalling party but less costly to the party with the higher-quality product
Which scenario best illustrates moral hazard?
Correct answer B. Enzo drives more recklessly after he buys car insurance
In a vote on spending for City Hall artwork, 40 percent of voters want to spend Rs1,000, 25 percent want Rs20,000 and 35 percent want Rs22,000. What are the median, average and modal preferred outcomes respectively?
Correct answer D. Rs20,000; Rs13,100; Rs1,000
Which statement about how people make decisions is NOT true?
Correct answer A. People are always rational maximisers
Firms sometimes pay workers bonuses in especially profitable years to stop them becoming disgruntled. Which principle helps explain this?
Correct answer C. People care about fairness
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About Asymmetric Information MCQs
Questions here deal with information problems and public choice. You will meet moral hazard, where a person behaves less carefully once their risk is covered or their effort cannot be observed, and the ways firms reduce it through monitoring, efficiency wages and delayed or bonus payments. Signalling questions ask what makes a signal, such as costly education or advertising, credible. The set also includes public choice items on pairwise majority voting and the median voter. These topics appear in advanced microeconomics papers for civil service and lecturer exams.
Exams that include Asymmetric Information MCQs
Pakistan
- CSS
- PMS
- PPSC Lecturer tests
India
- UGC NET
- UPSC CSE
Bangladesh
- BCS
- University admission tests (DU, RU, JU)
Frequently asked questions
What is the difference between moral hazard and adverse selection?
Moral hazard arises after an agreement, when one party changes behaviour because the other cannot fully monitor them, such as an insured driver taking more risks. Adverse selection arises before an agreement, when hidden characteristics lead to a poor mix of buyers or sellers, such as in a used car market.
What makes a signal effective?
For a signal to reveal private information, it must be costly to send, and less costly for the party with the better quality to send. Education and expensive advertising can work as signals because low-quality workers or firms would find them too costly to copy.
How many Asymmetric Information MCQs are on MCQs360?
MCQs360 has 17 Asymmetric Information MCQs, free to practise with no sign-up and with answers shown instantly. They help you revise moral hazard, signalling and voting models before economics papers. Start with the moral hazard questions, then move on to signalling and voting.
Last reviewed October 2026