Question 1

Informational asymmetry is a difference in

Accepted Answer

A) efficiency. 
B) equality. 
C) relevant knowledge. 
D) signaling. 
A) efficiency. 
B) equality. 
C) relevant knowledge. 
D) signaling.

Question 2

Which of the following is not an example of a systematic mistake that people make?

Accepted Answer

A) When asked to predict how many movie stars he can list, Ed says 200 but when put to the test he can only name 130. 
B) Susan watched a home improvement show in which a contractor installed a faulty deck which collapsed within 2 years of installation. She is now concerned about the safety of her own deck. 
C) Kate's manager asks her to work additional hours for which she will be paid her usual hourly wage. Kate weighs the value of her leisure time against the additional wages before responding to her manager. 
D) Bill has purchased Skillman tools for years and has recently noticed a decline in quality and durability of Skillman tools. Still, when he needs a new drill, he purchases a Skillman brand drill. 
A) When asked to predict how many movie stars he can list, Ed says 200 but when put to the test he can only name 130. 
B) Susan watched a home improvement show in which a contractor installed a faulty deck which collapsed within 2 years of installation. She is now concerned about the safety of her own deck. 
C) Kate's manager asks her to work additional hours for which she will be paid her usual hourly wage. Kate weighs the value of her leisure time against the additional wages before responding to her manager. 
D) Bill has purchased Skillman tools for years and has recently noticed a decline in quality and durability of Skillman tools. Still, when he needs a new drill, he purchases a Skillman brand drill.

Question 3

The adverse selection problem is a likely explanation for the fact that

Accepted Answer

A) some parents use video cameras to monitor the nannies caring for their children. 
B) some corporate managers were recently sent to prison for enriching themselves at the expense of shareholders. 
C) people in average health may be discouraged from buying health insurance by the high price. 
D) gifts can be interpreted as signals. 
A) some parents use video cameras to monitor the nannies caring for their children. 
B) some corporate managers were recently sent to prison for enriching themselves at the expense of shareholders. 
C) people in average health may be discouraged from buying health insurance by the high price. 
D) gifts can be interpreted as signals.

Question 4

In a vote between options A, B, and C, option C wins. When option B is eliminated and a vote is taken between option A and option C, option A wins. The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

Accepted Answer

A) unanimity 
B) transitivity 
C) independence of irrelevant alternatives 
D) No dictators 
A) unanimity 
B) transitivity 
C) independence of irrelevant alternatives 
D) No dictators

Question 5

Recent developments in political economy

Accepted Answer

A) render much of the traditional field of political science obsolete. 
B) render much of the traditional field of economics obsolete. 
C) illustrate the resolute nature of democracy. 
D) point to the fact that government is a less-than-perfect institution. 
A) render much of the traditional field of political science obsolete. 
B) render much of the traditional field of economics obsolete. 
C) illustrate the resolute nature of democracy. 
D) point to the fact that government is a less-than-perfect institution.

Question 6

In corporations, which of the following are principals but not agents?

Accepted Answer

A) shareholders 
B) the board of directors 
C) managers 
D) workers 
A) shareholders 
B) the board of directors 
C) managers 
D) workers

Question 7

Table 22-18
The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences.  
-Refer to Table 22-18. If the vote is conducted using a Borda count where each person's first choice receives 4 points, each person's second choice 3 points, each person's third choice 2 points, and each person's fourth choice 1 point, which alternative would win?

Accepted Answer

A) W 
B) X 
C) Y 
D) Z 
A) W 
B) X 
C) Y 
D) Z

Question 8

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not an example of signaling?

Accepted Answer

A) An employer calls the references of a potential employee before hiring him or her. 
B) A boyfriend gives his girlfriend a necklace with her favorite gemstone for Valentine's Day. 
C) A home flooring company advertises its high Better Business Bureau rating during its television commercials. 
D) A company advertises that it makes charitable contributions. 
A) An employer calls the references of a potential employee before hiring him or her. 
B) A boyfriend gives his girlfriend a necklace with her favorite gemstone for Valentine's Day. 
C) A home flooring company advertises its high Better Business Bureau rating during its television commercials. 
D) A company advertises that it makes charitable contributions.

Question 10

"Signaling" refers to actions by an informed party for the sole purpose of

Accepted Answer

A) telling another party that the signaler has information to reveal, without actually revealing that information. 
B) conveying false information. 
C) induce employees to put in the effort they are capable of. 
D) credibly revealing private information. 
A) telling another party that the signaler has information to reveal, without actually revealing that information. 
B) conveying false information. 
C) induce employees to put in the effort they are capable of. 
D) credibly revealing private information.

Question 11

Table 22-18
The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences.  
-Refer to Table 22-18. Suppose before any voting takes place that alternative W is eliminated as an option. Based on this information, the median voter's first choice is

Accepted Answer

A) X 
B) Y 
C) Z 
D) The median voter's first choice cannot be determined from the information given. 
A) X 
B) Y 
C) Z 
D) The median voter's first choice cannot be determined from the information given.

Question 12

Suppose a group of people read an article on capital punishment. Prior to reading the article, 60% of the members of the group were opposed to capital punishment, while 40% of the members of the group were in favor of capital punishment. According to studies of human decision-making, which of the following is likely?

Accepted Answer

A) After reading the article, all members of the group oppose capital punishment. 
B) After reading the article, all members of the group are in favor of capital punishment. 
C) After reading the article, 60% of the members of the group are opposed and 40% of the members of the group are in favor of capital punishment. 
D) The members of the group would elect a representative in favor of capital punishment. 
A) After reading the article, all members of the group oppose capital punishment. 
B) After reading the article, all members of the group are in favor of capital punishment. 
C) After reading the article, 60% of the members of the group are opposed and 40% of the members of the group are in favor of capital punishment. 
D) The members of the group would elect a representative in favor of capital punishment.

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. Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting by Allen, Brian, and Cody?

Accepted Answer

A) The paradox implies that pairwise voting never produces transitive preferences, and so the voting by Allen, Brian, and Cody fails to produce transitive preferences. 
B) The paradox implies that pairwise voting sometimes (but not always) produces transitive preferences, and the voting by Allen, Brian, and Cody does produce transitive preferences. 
C) The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting by Allen, Brian, and Cody fails to produce transitive preferences. 
D) The paradox does not apply to the case at hand, because Brian's preferences are not individually transitive. 
A) The paradox implies that pairwise voting never produces transitive preferences, and so the voting by Allen, Brian, and Cody fails to produce transitive preferences. 
B) The paradox implies that pairwise voting sometimes (but not always) produces transitive preferences, and the voting by Allen, Brian, and Cody does produce transitive preferences. 
C) The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting by Allen, Brian, and Cody fails to produce transitive preferences. 
D) The paradox does not apply to the case at hand, because Brian's preferences are not individually transitive.

Question 14

Table 22-11
Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.  
-Refer to Table 22-11. Which pairwise voting scheme would result in outcome A?

Accepted Answer

A) First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B) First, choose between A and C. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and D. 
C) First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D) First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B. 
A) First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B) First, choose between A and C. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and D. 
C) First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D) First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B.

Question 15

Table 22-4
The fortunate residents of Anytown have a budget surplus. The mayor decided that it is only fair to have the residents vote on what to do with the surplus. The mayor has narrowed the options down to three possible projects: a playground, a library, or a swimming pool. The voters fall into three categories and have preferences as illustrated in the table.  
-Refer to Table 22-4. If the mayor asks the residents to choose between the playground and the library using pairwise voting,

Accepted Answer

A) the playground wins by 45%. 
B) the playground wins by 60%. 
C) the library wins by 20%. 
D) the library wins by 80%. 
A) the playground wins by 45%. 
B) the playground wins by 60%. 
C) the library wins by 20%. 
D) the library wins by 80%.

Question 16

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 22-4
​
Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza. Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne. Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti.
-Refer to Scenario 22-4. If, before any votes were cast, ravioli was eliminated from the choices, the median voter's first choice would be

Accepted Answer

A) pizza. 
B) spaghetti 
C) lasagne. 
D) There is not enough information to answer this question. 
A) pizza. 
B) spaghetti 
C) lasagne. 
D) There is not enough information to answer this question.

Question 18

Table 22-15
Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below.  
-Refer to Table 22-15. If elections were held where voters choose either Fred or Mary, and then choose either the winner or Beth, what would the results be?

Accepted Answer

A) Fred would win the first and second elections. 
B) Fred would win the first election and Beth would win the second election. 
C) Mary would win the first and second elections. 
D) Mary would win the first election and Beth would win the second election. 
A) Fred would win the first and second elections. 
B) Fred would win the first election and Beth would win the second election. 
C) Mary would win the first and second elections. 
D) Mary would win the first election and Beth would win the second election.

Question 19

Bill would like to buy a gift for Ann to convey his love for her. Which of the following areas of economics would most likely study this type of decision?

Accepted Answer

A) asymmetric information 
B) political economy 
C) behavioral economics 
D) industrial organization 
A) asymmetric information 
B) political economy 
C) behavioral economics 
D) industrial organization

Question 20

Table 22-16
The Johnson family is planning a vacation and, though Mr. and Mrs. Johnson will be paying for the trip, they have decided to use a democratic voting process to choose their destination. The family members' preferences are reflected in the table below.  
-Refer to Table 22-16. Suppose that before the family can arrive at their decision, Opryland announced that it will be closed for the season due to flooding. Mr. Johnson recommends using a vote by majority rule and proposes first choosing between the Grand Canyon and Sea World, and then choosing between the winner of the first vote and Disneyland. If everyone votes according to their preferences,

Accepted Answer

A) the winner of the first vote will be Sea World, the winner of the second vote will be Disneyland. 
B) the winner of the first vote will be Sea World, the winner of the second vote will be Grand Canyon. 
C) the winner of the first vote will be Grand Canyon, the winner of the second vote will be Disneyland. 
D) the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon. 
A) the winner of the first vote will be Sea World, the winner of the second vote will be Disneyland. 
B) the winner of the first vote will be Sea World, the winner of the second vote will be Grand Canyon. 
C) the winner of the first vote will be Grand Canyon, the winner of the second vote will be Disneyland. 
D) the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon.

Informational asymmetry is a difference in

Which of the following is not an example of a systematic mistake that people make?

The adverse selection problem is a likely explanation for the fact that

In a vote between options A, B, and C, option C wins. When option B is eliminated and a vote is taken between option A and option C, option A wins. The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

Recent developments in political economy

In corporations, which of the following are principals but not agents?

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Which of the following is not an example of signaling?

"Signaling" refers to actions by an informed party for the sole purpose of

Table 22-11 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-11. Which pairwise voting scheme would result in outcome A?

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

Bill would like to buy a gift for Ann to convey his love for her. Which of the following areas of economics would most likely study this type of decision?

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

Informational asymmetry is a difference in

Which of the following is not an example of a systematic mistake that people make?

The adverse selection problem is a likely explanation for the fact that

In a vote between options A, B, and C, option C wins. When option B is eliminated and a vote is taken between option A and option C, option A wins. The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

Recent developments in political economy

In corporations, which of the following are principals but not agents?

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Which of the following is not an example of signaling?

"Signaling" refers to actions by an informed party for the sole purpose of

Table 22-11 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-11. Which pairwise voting scheme would result in outcome A?

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

Bill would like to buy a gift for Ann to convey his love for her. Which of the following areas of economics would most likely study this type of decision?

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