Question 1

According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time

Accepted Answer

A) is rational behavior. 
B) likely occurs because saving requires a sacrifice in the present for a reward in the distant future. 
C) likely occurs because Americans don't care about retirement. 
D) definitely would not happen if Americans earned a greater return on their investments. 
A) is rational behavior. 
B) likely occurs because saving requires a sacrifice in the present for a reward in the distant future. 
C) likely occurs because Americans don't care about retirement. 
D) definitely would not happen if Americans earned a greater return on their investments.

Question 2

An airline knows that business travelers have more inelastic demand for travel than vacationers. That is, business travelers are often willing to pay more for airline tickets than vacationers. The airline also knows that business travelers do not like to travel over weekends. When customers request airline tickets that do not involve travel over a weekend, the airline determines that a traveler is likely a business traveler and charges a higher price. This is an example of

Accepted Answer

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

Question 3

Which of the following is an example of an adverse selection problem?

Accepted Answer

A) A customer purchases four apples, two of which are bruised. 
B) A card shop puts its Halloween merchandise on sale on November 1st. 
C) A young job applicant fails to reveal that she was fired from her last job because she was incompetent. 
D) A man rents a car and then drives it less carefully and fills it with cheaper gas than he would if he owned it. 
A) A customer purchases four apples, two of which are bruised. 
B) A card shop puts its Halloween merchandise on sale on November 1st. 
C) A young job applicant fails to reveal that she was fired from her last job because she was incompetent. 
D) A man rents a car and then drives it less carefully and fills it with cheaper gas than he would if he owned it.

Question 4

Which of the following statements is not correct?

Accepted Answer

A) The median voter theorem explains why politicians appeal to the middle of the voting distribution. 
B) Based on studies of human decision making, most people prefer to procrastinate, both in the immediate future and in the distant future. 
C) Screening refers to an uninformed party trying to extract information from an informed party. 
D) Advertising can be an example of a company signaling the quality of its products. 
A) The median voter theorem explains why politicians appeal to the middle of the voting distribution. 
B) Based on studies of human decision making, most people prefer to procrastinate, both in the immediate future and in the distant future. 
C) Screening refers to an uninformed party trying to extract information from an informed party. 
D) Advertising can be an example of a company signaling the quality of its products.

Question 5

People tend to wait until deadlines get close to work on projects in part because they believe that they can complete the projects in less time than it will actually take. Which findings from behavioral economics is this observation consistent with?

Accepted Answer

A) People tend to be time inconsistent and people tend to be overconfident. 
B) People tend to be time inconsistent but not that people tend to be overconfident. 
C) People tend to be overconfident, but not that people tend to be time inconsistent. 
D) Neither that people tend to be overconfident nor that people tend to be time inconsistent. 
A) People tend to be time inconsistent and people tend to be overconfident. 
B) People tend to be time inconsistent but not that people tend to be overconfident. 
C) People tend to be overconfident, but not that people tend to be time inconsistent. 
D) Neither that people tend to be overconfident nor that people tend to be time inconsistent.

Question 6

The problem that arises in markets in which the seller knows more about the characteristics of the good being sold than the buyer knows is

Accepted Answer

The answer of The problem that arises in markets in...

Question 7

The Condorcet paradox shows that

Accepted Answer

A) allocations of resources based on majority rule are always inefficient. 
B) problems in counting votes can negate legitimate democratic outcomes. 
C) the order on which things are voted can affect the result. 
D) transitive preferences are inconsistent with rationality. 
A) allocations of resources based on majority rule are always inefficient. 
B) problems in counting votes can negate legitimate democratic outcomes. 
C) the order on which things are voted can affect the result. 
D) transitive preferences are inconsistent with rationality.

Question 8

Table 22-21
The following table shows the number of voters preferring various amounts of spending to develop a river to make it more attractive for canoeing and kayaking.  
-Refer to Table 22-21. Suppose the voters are asked to choose between $1 million and $2.5 million. If all voters cast a vote for the spending amount closest to their own preference, how many votes will the $1 million spending amount receive?

Accepted Answer

A) 25 
B) 47 
C) 72 
D) 102 
A) 25 
B) 47 
C) 72 
D) 102

Question 9

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. 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 10

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

Accepted Answer

The median voter theorem implies that po

Question 11

The criminal actions of the top managers of corporations such as Enron, Tyco, WorldCom, and Adelphia are an example of moral hazard.

Accepted Answer

A) True 
 B)False

Question 12

The ultimatum game reveals that

Accepted Answer

A) it does not make sense to try to maximize profits. 
B) people may have an innate sense of fairness that economic theory does not capture. 
C) offering someone a wildly unfair outcome is usually ok since people tend to make decisions using a "something is better than nothing" philosophy. 
D) Both a and b. 
A) it does not make sense to try to maximize profits. 
B) people may have an innate sense of fairness that economic theory does not capture. 
C) offering someone a wildly unfair outcome is usually ok since people tend to make decisions using a "something is better than nothing" philosophy. 
D) Both a and b.

Question 13

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to

Accepted Answer

A) efficiency-wage theories. 
B) equilibrium wage theories. 
C) screening theories. 
D) signaling theories. 
A) efficiency-wage theories. 
B) equilibrium wage theories. 
C) screening theories. 
D) signaling theories.

Question 14

Table 22-17  
-Refer to Table 22-17. The table shows the preferences for three types of voters over three possible outcomes: A, B, and C. The table also shows the percentage of voters of each type. Based on this information, which of the following statements is true?

Accepted Answer

A) In a vote between B and C, C loses since only the Type 1 voters prefer C to B. 
B) In a vote between A and B, B wins getting 85% of the total vote. 
C) In a vote between A and C, C loses getting only 45% of the total vote. 
D) Both a and b. 
A) In a vote between B and C, C loses since only the Type 1 voters prefer C to B. 
B) In a vote between A and B, B wins getting 85% of the total vote. 
C) In a vote between A and C, C loses getting only 45% of the total vote. 
D) Both a and b.

Question 15

A brand of wine is priced at only $5 per bottle, far below the market price of most high quality wines. Before any reputation exists for the wine, consumers buy very little of this inexpensive wine because they interpret the low price to mean that the wine is of poor quality. The company decides to change the label on the wine to show that it has won awards for quality. This label change is an example of

Accepted Answer

A) signaling. 
B) screening. 
C) selecting. 
D) All of the above are correct. 
A) signaling. 
B) screening. 
C) selecting. 
D) All of the above are correct.

Question 16

State one reason why government intervention may not be a good solution to an asymmetric information problem.

Accepted Answer

Possible answers:
1. The private market

Question 17

Which of the following statements is not correct?

Accepted Answer

A) Based on studies of human decision making, most people value fairness. 
B) Based on studies of human decision making, some people's preference are inconsistent over time. 
C) Government intervention is the best remedy for the problems caused by asymmetric information. 
D) Advertising can be an example of a company signaling the quality of its products. 
A) Based on studies of human decision making, most people value fairness. 
B) Based on studies of human decision making, some people's preference are inconsistent over time. 
C) Government intervention is the best remedy for the problems caused by asymmetric information. 
D) Advertising can be an example of a company signaling the quality of its products.

Question 18

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Accepted Answer

A) $500 and that the other player gets $500. 
B) $998 and that the other player gets $2. 
C) $999 and that the other player gets $1. 
D) $1000 and that the other player gets nothing. 
A) $500 and that the other player gets $500. 
B) $998 and that the other player gets $2. 
C) $999 and that the other player gets $1. 
D) $1000 and that the other player gets nothing.

Question 19

Which of the following relationships involves asymmetric information?

Accepted Answer

A) An employee is unsure what she will spend her annual performance bonus on. 
B) A loan applicant knows more about the likelihood her business will be successful than the loan officer. 
C) Someone considering buying running shoes looks at a number of online reviews by buyers. 
D) All of the above are correct. 
A) An employee is unsure what she will spend her annual performance bonus on. 
B) A loan applicant knows more about the likelihood her business will be successful than the loan officer. 
C) Someone considering buying running shoes looks at a number of online reviews by buyers. 
D) All of the above are correct.

Question 20

Which of the following statements captures the meaning of transitivity of preferences?

Accepted Answer

A) If A is preferred to B, then B is less preferred than A. 
B) If A is preferred to B, and B is preferred to C, then A is preferred to C. 
C) If A is preferred to B and B is preferred to C, then the preference for A over B is stronger than the preference for B over C. 
D) If A is preferred to C, then there exists B such that A is preferred to B and C is preferred to A. 
A) If A is preferred to B, then B is less preferred than A. 
B) If A is preferred to B, and B is preferred to C, then A is preferred to C. 
C) If A is preferred to B and B is preferred to C, then the preference for A over B is stronger than the preference for B over C. 
D) If A is preferred to C, then there exists B such that A is preferred to B and C is preferred to A.

According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time

Which of the following is an example of an adverse selection problem?

Which of the following statements is not correct?

People tend to wait until deadlines get close to work on projects in part because they believe that they can complete the projects in less time than it will actually take. Which findings from behavioral economics is this observation consistent with?

The problem that arises in markets in which the seller knows more about the characteristics of the good being sold than the buyer knows is

The Condorcet paradox shows that

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

The criminal actions of the top managers of corporations such as Enron, Tyco, WorldCom, and Adelphia are an example of moral hazard.

The ultimatum game reveals that

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to

Table 22-17 -Refer to Table 22-17. The table shows the preferences for three types of voters over three possible outcomes: A, B, and C. The table also shows the percentage of voters of each type. Based on this information, which of the following statements is true?

State one reason why government intervention may not be a good solution to an asymmetric information problem.

Which of the following statements is not correct?

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Which of the following relationships involves asymmetric information?

Which of the following statements captures the meaning of transitivity of preferences?

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

According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time

Which of the following is an example of an adverse selection problem?

Which of the following statements is not correct?

People tend to wait until deadlines get close to work on projects in part because they believe that they can complete the projects in less time than it will actually take. Which findings from behavioral economics is this observation consistent with?

The problem that arises in markets in which the seller knows more about the characteristics of the good being sold than the buyer knows is

The Condorcet paradox shows that

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

The criminal actions of the top managers of corporations such as Enron, Tyco, WorldCom, and Adelphia are an example of moral hazard.

The ultimatum game reveals that

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to

Table 22-17 -Refer to Table 22-17. The table shows the preferences for three types of voters over three possible outcomes: A, B, and C. The table also shows the percentage of voters of each type. Based on this information, which of the following statements is true?

State one reason why government intervention may not be a good solution to an asymmetric information problem.

Which of the following statements is not correct?

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Which of the following relationships involves asymmetric information?

Which of the following statements captures the meaning of transitivity of preferences?

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