Question 1

When a corporation decides to include its own corporate stock as part of the compensation for its employees, it is trying to solve the

Accepted Answer

A) adverse selection problem. 
B) principal-agent problem. 
C) lemons problem. 
D) signaling problem. 
A) adverse selection problem. 
B) principal-agent problem. 
C) lemons problem. 
D) signaling problem.

Question 2

The temptation of imperfectly-monitored workers to shirk their responsibilities is

Accepted Answer

A) an example of the moral hazard problem. 
B) an example of the adverse selection problem. 
C) an example of screening. 
D) an example of signaling. 
A) an example of the moral hazard problem. 
B) an example of the adverse selection problem. 
C) an example of screening. 
D) an example of signaling.

Question 3

Suppose that residents of a town are asked to vote on the best day to improve the safety of an intersection. The three choices are: a stoplight, a 4-way stop, and a 2-way stop. The mayor asks the residents to assign 3 points to their first choice, 2 points to their second choice, and 1 point to their last choice. The intersection will be controlled by the method that receives the most points. This voting scheme is called

Accepted Answer

A) Arrow's impossibility theorem. 
B) the Condorcet paradox. 
C) a Borda count. 
D) the median voter theorem. 
A) Arrow's impossibility theorem. 
B) the Condorcet paradox. 
C) a Borda count. 
D) the median voter theorem.

Question 4

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "unanimity" to mean

Accepted Answer

A) A beats B only if everyone prefers A to B. 
B) if everyone prefers A to B, then A beats B. 
C) if A beats B and B beats C, then A must best C. 
D) everyone who is eligible to vote must vote; otherwise, the outcome is invalid. 
A) A beats B only if everyone prefers A to B. 
B) if everyone prefers A to B, then A beats B. 
C) if A beats B and B beats C, then A must best C. 
D) everyone who is eligible to vote must vote; otherwise, the outcome is invalid.

Question 5

The classic example of adverse selection is the

Accepted Answer

A) market for used cars. 
B) market for new cars. 
C) relationship between shareholders and managers. 
D) relationship between a coach and an athlete. 
A) market for used cars. 
B) market for new cars. 
C) relationship between shareholders and managers. 
D) relationship between a coach and an athlete.

Question 6

Smoking cessation tools (e.g., nicotine gum) provide evidence that people behave in a time inconsistent manner.

Accepted Answer

A) True 
 B)False

Question 7

A community has five voters who are interested in only one issue: the government's spending on local parks. If Andre would like the government to spend $12,000 on parks, Brandon prefers $7,000, Charlene prefers $4,000, Dennis prefers $2,000, and Ernie prefers $0, how much spending would a politician seeking to win the election select when running against one opponent?

Accepted Answer

A) $2,000 
B) $4,000 
C) $7,000 
D) $12,000 
A) $2,000 
B) $4,000 
C) $7,000 
D) $12,000

Question 8

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

Accepted Answer

A) principal-agent problem. 
B) moral-hazard problem. 
C) adverse-selection problem. 
D) signaling problem. 
A) principal-agent problem. 
B) moral-hazard problem. 
C) adverse-selection problem. 
D) signaling problem.

Question 9

Which of the following is an example of satisficing behavior?

Accepted Answer

A) You continue studying for your economics exam until you believe you'll get a score that's good enough. 
B) You spend time looking over the lettuce at the grocery store in order to make sure you get the best head of lettuce. 
C) You clean your room to the point where you think it's clean enough that further time can be used for more productive purposes. 
D) You carefully plan your day in order to get "the most out of life." 
A) You continue studying for your economics exam until you believe you'll get a score that's good enough. 
B) You spend time looking over the lettuce at the grocery store in order to make sure you get the best head of lettuce. 
C) You clean your room to the point where you think it's clean enough that further time can be used for more productive purposes. 
D) You carefully plan your day in order to get "the most out of life."

Question 10

People with hidden health problems are more likely to buy health insurance than are other people. This is an example of

Accepted Answer

A) moral hazard and makes the cost of health insurance higher than otherwise. 
B) moral hazard and makes the cost of health insurance lower than otherwise. 
C) adverse selection and makes the cost of health insurance higher than otherwise. 
D) adverse selection and makes the cost of health insurance lower than otherwise. 
A) moral hazard and makes the cost of health insurance higher than otherwise. 
B) moral hazard and makes the cost of health insurance lower than otherwise. 
C) adverse selection and makes the cost of health insurance higher than otherwise. 
D) adverse selection and makes the cost of health insurance lower than otherwise.

Question 11

In American politics, we often observe that during a campaign, the Democratic and Republican positions on many issues are similar, which illustrates

Accepted Answer

A) Arrow's impossibility theorem. 
B) the Condorcet paradox. 
C) a Borda count. 
D) the median voter theorem. 
A) Arrow's impossibility theorem. 
B) the Condorcet paradox. 
C) a Borda count. 
D) the median voter theorem.

Question 12

Rick goes to work 8 hours per day, but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams. This is an example of

Accepted Answer

A) the Condorcet Paradox. 
B) signaling. 
C) moral hazard. 
D) screening. 
A) the Condorcet Paradox. 
B) signaling. 
C) moral hazard. 
D) screening.

Question 13

Table 22-2
Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their Sunday afternoon. They all agree that they should do one of three things: go to a movie, play golf, or go to a baseball game. They also agree that they will have two pairwise votes to determine how to spend their afternoon, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the table below.  
-Refer to Table 22-2. If (1) the first vote pits "baseball game" against "movie," and (2) the second vote pits "golf" against the winner of the first vote, then the outcome is as follows:

Accepted Answer

A) "Baseball game" wins the first vote and "baseball game" wins the second vote, so they go to a baseball game. 
B) "Baseball game" wins the first vote and "golf" wins the second vote, so they go to the golf. 
C) "Movie" wins the first vote and "movie" wins the second vote, so they go to a movie. 
D) "Movie" wins the first vote and "golf" wins the second vote, so they play golf. 
A) "Baseball game" wins the first vote and "baseball game" wins the second vote, so they go to a baseball game. 
B) "Baseball game" wins the first vote and "golf" wins the second vote, so they go to the golf. 
C) "Movie" wins the first vote and "movie" wins the second vote, so they go to a movie. 
D) "Movie" wins the first vote and "golf" wins the second vote, so they play golf.

Question 14

A college professor hires a student to babysit her children and pays the student an efficiency-wage. Which of the following is correct about the wage the student earns?

Accepted Answer

A) The wage is higher than the wage the student could earn working a similar job elsewhere. 
B) The wage is the same as the wage the student could earn working a similar job elsewhere. 
C) The wage is lower than the wage the student could earn working a similar job elsewhere. 
D) The wage is likely to result in the student shirking responsibilities. 
A) The wage is higher than the wage the student could earn working a similar job elsewhere. 
B) The wage is the same as the wage the student could earn working a similar job elsewhere. 
C) The wage is lower than the wage the student could earn working a similar job elsewhere. 
D) The wage is likely to result in the student shirking responsibilities.

Question 15

The median-voter theorem explains why

Accepted Answer

A) politicians take extreme stands on issues. 
B) voters are attracted to political outsiders. 
C) two opposing politicians tend to take opposite sides of each issues. 
D) politicians tend to take middle-of-the-road positions. 
A) politicians take extreme stands on issues. 
B) voters are attracted to political outsiders. 
C) two opposing politicians tend to take opposite sides of each issues. 
D) politicians tend to take middle-of-the-road positions.

Question 16

The Latin term caveat emptor, meaning "let the buyer beware," brings to mind the problem of

Accepted Answer

A) hidden actions. 
B) adverse selection. 
C) principals and agents. 
D) moral hazard. 
A) hidden actions. 
B) adverse selection. 
C) principals and agents. 
D) moral hazard.

Question 17

Table 22-1
Three friends -- Linda, Stephanie, and Jamie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: France, Greece, or Italy. They also agree that they will have two pairwise votes to determine where to go on vacation, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the table below.  
-Refer to Table 22-1. If the friends change their minds and decide to choose a vacation destination using a Borda count, then

Accepted Answer

A) the friends will go to France. 
B) the friends will go to Greece. 
C) the friends will go to Italy. 
D) A Borda count will not result in a single winner in this case. 
A) the friends will go to France. 
B) the friends will go to Greece. 
C) the friends will go to Italy. 
D) A Borda count will not result in a single winner in this case.

Question 18

Most economic models

Accepted Answer

A) incorporate the assumption of rational behavior on the part of economic actors. 
B) incorporate the notion that people are usually reluctant to change their minds. 
C) are meant to precisely duplicate reality. 
D) assume that people often make sub-optimal choices. 
A) incorporate the assumption of rational behavior on the part of economic actors. 
B) incorporate the notion that people are usually reluctant to change their minds. 
C) are meant to precisely duplicate reality. 
D) assume that people often make sub-optimal choices.

Question 19

Table 22-14
Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired.   '
-Refer to Table 22-14. Adams calls and says she's accepted another position. In which case does Campbell win against Brown?

Accepted Answer

A) both a pairwise vote and a Borda Count vote 
B) a pairwise vote, but not a Borda Count vote 
C) a Borda Count vote, but not a pairwise vote 
D) neither a Borda Count vote, nor a pairwise vote 
A) both a pairwise vote and a Borda Count vote 
B) a pairwise vote, but not a Borda Count vote 
C) a Borda Count vote, but not a pairwise vote 
D) neither a Borda Count vote, nor a pairwise vote

Question 20

Table 22-6  
-Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. Which of the following statements is true?

Accepted Answer

A) In pairwise majority voting, B is preferred to A, A is preferred to C, and B is preferred to C. 
B) In pairwise majority voting, C is preferred to B, B is preferred to A, and C is preferred to A. 
C) In pairwise majority voting, B is preferred to A, A is preferred to C, and C is preferred to B. 
D) In pairwise majority voting, A is preferred to C, C is preferred to B, and A is preferred to B. 
A) In pairwise majority voting, B is preferred to A, A is preferred to C, and B is preferred to C. 
B) In pairwise majority voting, C is preferred to B, B is preferred to A, and C is preferred to A. 
C) In pairwise majority voting, B is preferred to A, A is preferred to C, and C is preferred to B. 
D) In pairwise majority voting, A is preferred to C, C is preferred to B, and A is preferred to B.

When a corporation decides to include its own corporate stock as part of the compensation for its employees, it is trying to solve the

The temptation of imperfectly-monitored workers to shirk their responsibilities is

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "unanimity" to mean

The classic example of adverse selection is the

Smoking cessation tools (e.g., nicotine gum) provide evidence that people behave in a time inconsistent manner.

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

Which of the following is an example of satisficing behavior?

People with hidden health problems are more likely to buy health insurance than are other people. This is an example of

In American politics, we often observe that during a campaign, the Democratic and Republican positions on many issues are similar, which illustrates

Rick goes to work 8 hours per day, but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams. This is an example of

A college professor hires a student to babysit her children and pays the student an efficiency-wage. Which of the following is correct about the wage the student earns?

The median-voter theorem explains why

The Latin term caveat emptor, meaning "let the buyer beware," brings to mind the problem of

Most economic models

Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. ' -Refer to Table 22-14. Adams calls and says she's accepted another position. In which case does Campbell win against Brown?

Table 22-6 -Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. Which of the following statements is true?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Filters

Exam 22: Frontiers in Microeconomics

When a corporation decides to include its own corporate stock as part of the compensation for its employees, it is trying to solve the

The temptation of imperfectly-monitored workers to shirk their responsibilities is

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "unanimity" to mean

The classic example of adverse selection is the

Smoking cessation tools (e.g., nicotine gum) provide evidence that people behave in a time inconsistent manner.

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

Which of the following is an example of satisficing behavior?

People with hidden health problems are more likely to buy health insurance than are other people. This is an example of

In American politics, we often observe that during a campaign, the Democratic and Republican positions on many issues are similar, which illustrates

Rick goes to work 8 hours per day, but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams. This is an example of

A college professor hires a student to babysit her children and pays the student an efficiency-wage. Which of the following is correct about the wage the student earns?

The median-voter theorem explains why

The Latin term caveat emptor, meaning "let the buyer beware," brings to mind the problem of

Most economic models

Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. ' -Refer to Table 22-14. Adams calls and says she's accepted another position. In which case does Campbell win against Brown?

Table 22-6 -Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. Which of the following statements is true?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Filters