Question 1

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

Accepted Answer

A) The income of waiters and waitresses depends heavily on tips. 
B) An employer pays below equilibrium wages because he thinks his employees are not working as hard as they could be. 
C) The professors leaves the room to prevent cheating on exams. 
D) Tenure professors are not supervised closely. 
A) The income of waiters and waitresses depends heavily on tips. 
B) An employer pays below equilibrium wages because he thinks his employees are not working as hard as they could be. 
C) The professors leaves the room to prevent cheating on exams. 
D) Tenure professors are not supervised closely.

Question 2

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Accepted Answer

A) people are overconfident 
B) people give too much weight to a small number of vivid observations 
C) people are reluctant to change their minds 
D) All of the above are correct. 
A) people are overconfident 
B) people give too much weight to a small number of vivid observations 
C) people are reluctant to change their minds 
D) All of the above are correct.

Question 3

Which of the following is an example of screening?

Accepted Answer

A) A lender checks a loan applicants credit history. 
B) When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C) When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not. 
D) All of the above are correct. 
A) A lender checks a loan applicants credit history. 
B) When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C) When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not. 
D) All of the above are correct.

Question 4

Which voter is the voter whose views on a policy issue are in the middle of the spectrum, with half of the voters on one side of this voter's view and half on the other side.

Accepted Answer

A) Average voter 
B) Mean voter 
C) Modal voter 
D) Median voter 
A) Average voter 
B) Mean voter 
C) Modal voter 
D) Median voter

Question 5

The Borda count fails to satisfy which of Kenneth Arrow's properties of a "perfect" voting system?

Accepted Answer

A) no dictator 
B) unanimity 
C) transitivity 
D) independence of irrelevant alternatives 
A) no dictator 
B) unanimity 
C) transitivity 
D) independence of irrelevant alternatives

Question 6

In the employer-worker relationship, the employer is regarded as the "principal" and the worker is regarded as the "agent."

Accepted Answer

A) True 
 B)False

Question 7

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?

Accepted Answer

A) In a pairwise election, "movie" beats "golf." 
B) In a pairwise election, "golf" beats "baseball game." 
C) In a pairwise election, "baseball game" beats "movie." 
D) None of the above is correct. 
A) In a pairwise election, "movie" beats "golf." 
B) In a pairwise election, "golf" beats "baseball game." 
C) In a pairwise election, "baseball game" beats "movie." 
D) None of the above is correct.

Question 8

Informational asymmetry may apply to a hidden action or hidden characteristic where the informed party may be reluctant to reveal relevant information.

Accepted Answer

A) True 
 B)False

Question 9

Rather than always choosing the best course of action, humans make decisions that are merely good enough. In other words, they are

Accepted Answer

The answer of Rather than always choosing the best course...

Question 10

Information asymmetry refers to

Accepted Answer

A) the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior. 
B) the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party. 
C) an action taken by an informed party to reveal private information to an uninformed party. 
D) a difference in access to relevant knowledge. 
A) the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior. 
B) the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party. 
C) an action taken by an informed party to reveal private information to an uninformed party. 
D) a difference in access to relevant knowledge.

Question 11

The fact that someone with information about a significant number of illnesses in their family history is likely to purchase health insurance is an example of

Accepted Answer

A) adverse selection. 
B) monitoring. 
C) moral hazard. 
D) screening. 
A) adverse selection. 
B) monitoring. 
C) moral hazard. 
D) screening.

Question 12

Kris and Kelly have been dating for several years. Kris loves Kelly very much and wants to marry her. Which of the following is the best way to signal his love to her?

Accepted Answer

A) Kris should buy Kelly a box of his favorite chocolates. 
B) Kris should give Kelly $15,000 cash to purchase her own engagement ring, since he doesn't know what kind she would like. 
C) Kris should buy Kelly the diamond ring that she has been looking at recently in the jewelry store window. 
D) Kris should send Kelly a text asking for her hand in marriage. 
A) Kris should buy Kelly a box of his favorite chocolates. 
B) Kris should give Kelly $15,000 cash to purchase her own engagement ring, since he doesn't know what kind she would like. 
C) Kris should buy Kelly the diamond ring that she has been looking at recently in the jewelry store window. 
D) Kris should send Kelly a text asking for her hand in marriage.

Question 13

Table 22-3
Three family members -- Seamus, Maeve, and Siobhan -- are deciding what type of movie to attend. The three choices are an action adventure, comedy, or horror. The first, second, and third choices for each person are as indicated in the table below.  
-Refer to Table 22-3. If the voting method is a Borda count, which alternative will be chosen?

Accepted Answer

A) Comedy 
B) Action 
C) Horror 
D) None of the above is correct; a Borda count fails to produce a winner in this instance. 
A) Comedy 
B) Action 
C) Horror 
D) None of the above is correct; a Borda count fails to produce a winner in this instance.

Question 14

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Accepted Answer

A) signaling. 
B) screening. 
C) monitoring. 
D) principal. 
A) signaling. 
B) screening. 
C) monitoring. 
D) principal.

Question 15

Which of the following would violate transitivity?

Accepted Answer

A) Vanessa likes A more than B, C more than B, and C more than A. 
B) Jay likes C more than B, A more than B, B more than D, and C more than D. 
C) Maddy likes C more than A, B more than D, A more than B, and D more than C. 
D) Victoria likes C more than B, C more than D, and B more than D. 
A) Vanessa likes A more than B, C more than B, and C more than A. 
B) Jay likes C more than B, A more than B, B more than D, and C more than D. 
C) Maddy likes C more than A, B more than D, A more than B, and D more than C. 
D) Victoria likes C more than B, C more than D, and B more than D.

Question 16

Adverse selection may lead to

Accepted Answer

A) owners of used cars choosing to keep them rather than sell them at the low price that skeptical buyers are willing to pay. 
B) wages being stuck above the level that balances supply and demand, resulting in unemployment. 
C) buyers with low risk choosing to remain uninsured because the policies they are offered fail to reflect their true characteristics. 
D) All of the above are correct. 
A) owners of used cars choosing to keep them rather than sell them at the low price that skeptical buyers are willing to pay. 
B) wages being stuck above the level that balances supply and demand, resulting in unemployment. 
C) buyers with low risk choosing to remain uninsured because the policies they are offered fail to reflect their true characteristics. 
D) All of the above are correct.

Question 17

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany exhibit?

Accepted Answer

A) People are overconfident. 
B) People care about fairness. 
C) People are reluctant to change their minds. 
D) People are inconsistent over time. 
A) People are overconfident. 
B) People care about fairness. 
C) People are reluctant to change their minds. 
D) People are inconsistent over time.

Question 18

A woman gives her boyfriend a birthday present. The gift could be viewed by the boyfriend as a

Accepted Answer

A) moral hazard problem. 
B) screening device. 
C) signal of how much she cares for him. 
D) All of the above are correct. 
A) moral hazard problem. 
B) screening device. 
C) signal of how much she cares for him. 
D) All of the above are correct.

Question 19

Table 22-24
The citizens of Mayville are having a severe budget shortage and are faced with eliminating athletics from the town high school. The town administrator has determined that the town can afford to maintain one sport. 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 22-24. Suppose the townspeople vote and choose hockey but the town administrator overrules the vote and chooses football because the town's football team has a chance of winning the state championship. Which of the properties of Arrow's impossibility theorem is violated?

Accepted Answer

The answer of Table 22-24
The citizens of Mayville are having...

Question 20

Susan buys automobile insurance from Provident Insurance Company. If Susan avoids having an accident for three years, Provident will reduce the premiums she has to pay for her insurance. Nevertheless, she routinely drives while eating or texting and speeds up to try to make it through yellow lights.

Accepted Answer

A) This is an adverse selection problem which should be corrected with government intervention. 
B) Susan is a principal and Provident is an agent in this principal-agent problem. 
C) This is a moral hazard problem. 
D) There is no way for Provident to determine whether Susan is a cautious or risky driver. 
A) This is an adverse selection problem which should be corrected with government intervention. 
B) Susan is a principal and Provident is an agent in this principal-agent problem. 
C) This is a moral hazard problem. 
D) There is no way for Provident to determine whether Susan is a cautious or risky driver.

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Which of the following is an example of screening?

Which voter is the voter whose views on a policy issue are in the middle of the spectrum, with half of the voters on one side of this voter's view and half on the other side.

The Borda count fails to satisfy which of Kenneth Arrow's properties of a "perfect" voting system?

In the employer-worker relationship, the employer is regarded as the "principal" and the worker is regarded as the "agent."

Informational asymmetry may apply to a hidden action or hidden characteristic where the informed party may be reluctant to reveal relevant information.

Rather than always choosing the best course of action, humans make decisions that are merely good enough. In other words, they are

Information asymmetry refers to

The fact that someone with information about a significant number of illnesses in their family history is likely to purchase health insurance is an example of

Kris and Kelly have been dating for several years. Kris loves Kelly very much and wants to marry her. Which of the following is the best way to signal his love to her?

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Which of the following would violate transitivity?

Adverse selection may lead to

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany exhibit?

A woman gives her boyfriend a birthday present. The gift could be viewed by the boyfriend as a

Susan buys automobile insurance from Provident Insurance Company. If Susan avoids having an accident for three years, Provident will reduce the premiums she has to pay for her insurance. Nevertheless, she routinely drives while eating or texting and speeds up to try to make it through yellow lights.

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

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Which of the following is an example of screening?

Which voter is the voter whose views on a policy issue are in the middle of the spectrum, with half of the voters on one side of this voter's view and half on the other side.

The Borda count fails to satisfy which of Kenneth Arrow's properties of a "perfect" voting system?

In the employer-worker relationship, the employer is regarded as the "principal" and the worker is regarded as the "agent."

Informational asymmetry may apply to a hidden action or hidden characteristic where the informed party may be reluctant to reveal relevant information.

Rather than always choosing the best course of action, humans make decisions that are merely good enough. In other words, they are

Information asymmetry refers to

The fact that someone with information about a significant number of illnesses in their family history is likely to purchase health insurance is an example of

Kris and Kelly have been dating for several years. Kris loves Kelly very much and wants to marry her. Which of the following is the best way to signal his love to her?

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Which of the following would violate transitivity?

Adverse selection may lead to

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany exhibit?

A woman gives her boyfriend a birthday present. The gift could be viewed by the boyfriend as a

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