Exam 22: Frontiers in Microeconomics

In Homer's Odyssey, Odysseus instructs his crew members to tie him to the mast of the ship so that he is not later tempted by the Siren's song. Which of the following irrational behaviors was he trying to avoid?

A life insurance company requires new applicants to have a medical exam prior to writing the insurance policy. This requirement is an example of

Moral hazard occurs when

Table 22-20 The table below shows the preferred city budget (in millions) for in the city of Springfield. -Refer to Table 22-20. In an election, each voter will select the budget closest to his or her most preferred budget. In which of the following cases does a budget of $32 win?

Herbert Simon, one of the first social scientists to work at the boundary of economics and psychology, suggested that humans should be viewed not as rational maximers but as

Asymmetric information, political economy, and behavioral economics

​Arrow's impossibility theorem proves that

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Narrative 22-1 Katie owns a boutique that sells high-end women's clothing and accessories. Shana works part-time at the boutique and frequently is the only employee in this small store. Katie pays Shana a wage that is higher than the market wage for this type of job. When the store is not full of customers, Shana diligently works on displays and cleans to keep the store looking its best. Magda is a customer in the store who asks Shana's opinion on the quality of some jeans she is considering purchasing. Even though she's had several other customers return them due to flaws, Shana tells Magda the quality is great. Belinda is another customer who is returning a necklace without revealing that she lost a gem from it while wearing it. -Refer to Narrative 22-1. Which of the ladies is an agent?

One of the things that employers can do to lessen the moral hazard problem involving their employees is to pay them in advance for their work.

Sam needs to have his car serviced. There is an auto repair shop located nearby that does a lot of business and has an online rating of 4 out of 5 stars. Sam takes his car to be serviced and thinks the service person is grumpy and that his car is still not running as well as it could be. Sam then makes a point of telling his friends not to use the repair shop. Sam's actions illustrate which of the following systematic mistakes that people make when making decisions?

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow defined a "perfect" voting system. That system includes which of the following features?

Ihaveathousandfriends Social Networking firm had a remarkably profitable year. As a result, its employees expect to receive bonus checks. Which of the following insights into human behavior do the employees exhibit?

Employers can try to overcome the moral-hazard problem involving their employees by

Table 22-25 Sophie, Huan, and Santiago are lost with no map or GPS available. They come to an intersection at which they can turn left, turn right, or continue going straight. Their preferences are summarized in the table. -Refer to Table 22-25. If the travelers decide to use a Borda count, what is the result?

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

A travel agency offers a money-back guarantee for vacationers taking their first cruise in case they do not enjoy the experience. This guarantee is an example of

Table 22-5 The citizens of Anytown will decide whether to build a new library, a recreation center, or an arena. Exactly one of the three choices will prevail, and the choice will be made by way of pairwise voting, with the majority determining the outcome on each vote. The preferences of the voters are summarized in the table below. -Refer to Table 22-5. Which of the following statements is correct?

When each voter has a most-preferred outcome for the expenditure on a particular government program, majority rule will produce the outcome

In a dictator game, player A must divide $100 between player A and player B. In this game, player B does not have the opportunity to reject an offer - he or she goes home with whatever player A offers. Experiments have observed that when player A splits the $100, he or she consistently offers over $10 to player B. Which of the following comments fits best.