What this practice covers
These questions are drawn from past IB Economics papers and filtered to asymmetric information. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
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What examiners see students get wrong here
These are the errors that cost marks on asymmetric information, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Confusing adverse selection with moral hazard. Remember: before/characteristics versus after/behaviour.
- Describing plain ignorance rather than an asymmetry between the two parties.
- Assuming only government can respond, and ignoring signalling and screening.
- Forgetting that compulsory insurance addresses adverse selection but not moral hazard.
- Treating any reassurance as a signal, a signal must be costly to fake.
- Stating that the market fails without explaining the mechanism by which good products or low-risk customers are driven out.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Asymmetric Information revision notes.