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

Studies of human decision-making show that

Accepted Answer

A) firms are less likely to maximize profits than consumers are to maximize utility. 
B) firms are more likely to maximize profits than consumers are to maximize utility. 
C) people are irrational more often than they are rational. 
D) people are reluctant to change their minds. 
A) firms are less likely to maximize profits than consumers are to maximize utility. 
B) firms are more likely to maximize profits than consumers are to maximize utility. 
C) people are irrational more often than they are rational. 
D) people are reluctant to change their minds.

Question 3

Table 22-22
The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below.  
-Refer to Table 22-22. If there is a vote between a budget of $16 million and $20 million and voter vote for the budget nearest their preferred budget, then the median voter will vote to spend

Accepted Answer

A) $16 million and the voting outcome will be $16 million. 
B) $16 million and the voting outcome will be $20 million. 
C) $20 million and the voting outcome will be $20million. 
D) $20 million and the voting outcome will be $20 million. 
A) $16 million and the voting outcome will be $16 million. 
B) $16 million and the voting outcome will be $20 million. 
C) $20 million and the voting outcome will be $20million. 
D) $20 million and the voting outcome will be $20 million.

Question 4

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

Accepted Answer

A) True 
 B)False

Question 5

When asked to give a range for the height of the tallest mountain in North America such that people were 90 percent confident the true number falls within it, most people gave ranges that were

Accepted Answer

The answer of When asked to give a range for...

Question 6

Which of the following is not correct?

Accepted Answer

A) An example of adverse selection is man who tries to sell his used car without disclosing that it needs a new transmission. 
B) The "invisible hand" of a free market will always fix the problems of adverse selection and moral hazard. 
C) An employer may try to prevent a moral hazard problem by paying her workers an efficiency wage. 
D) One interpretation of gift giving is that it reflects asymmetric information and signaling. 
A) An example of adverse selection is man who tries to sell his used car without disclosing that it needs a new transmission. 
B) The "invisible hand" of a free market will always fix the problems of adverse selection and moral hazard. 
C) An employer may try to prevent a moral hazard problem by paying her workers an efficiency wage. 
D) One interpretation of gift giving is that it reflects asymmetric information and signaling.

Question 7

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 8

Signaling is an action taken by an uninformed party to induce an informed party to reveal information.

Accepted Answer

A) True 
 B)False

Question 9

The median voter

Accepted Answer

A) is the voter exactly in the middle of the distribution. 
B) is the voter whose preferred outcome beats any other proposal in a two-way race. 
C) always has more than half the votes on his side in a two-way race. 
D) All of the above are correct. 
A) is the voter exactly in the middle of the distribution. 
B) is the voter whose preferred outcome beats any other proposal in a two-way race. 
C) always has more than half the votes on his side in a two-way race. 
D) All of the above are correct.

Question 10

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

Accepted Answer

A) True 
 B)False

Question 11

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

Accepted Answer

A) True 
 B)False

Question 12

Based on studies of human decision making, many people care more about the fairness of a game than about their personal winnings.

Accepted Answer

A) True 
 B)False

Question 13

Table 22-6  
-Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. In pairwise majority voting in which voters choose first between A and B and then choose between the winner of the first vote and C,

Accepted Answer

A) outcome A will win the election. 
B) outcome B will win the election. 
C) outcome C will win the election. 
D) the outcome of the election cannot be determined with the given information. 
A) outcome A will win the election. 
B) outcome B will win the election. 
C) outcome C will win the election. 
D) the outcome of the election cannot be determined with the given information.

Question 14

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 15

Table 22-9  
-Refer to Table 22-9. The table shows the preferences of four types of voters over four possible outcomes: A, B, C, and D. In addition, the table shows the percentage of voters of each type. Suppose that, for some reason, D is eliminated as a possible option. Using a Borda count election, with 3 points for the best choice, 2 points for the second best choice, and 1 point for the last choice, which outcome would win this election?

Accepted Answer

A) A 
B) B 
C) C 
D) There would be a three-way tie. 
A) A 
B) B 
C) C 
D) There would be a three-way tie.

Question 16

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This may be reducing sales. In this example, you are the

Accepted Answer

A) principal and the your employee is the agent. 
B) agent and the your employee is the principal. 
C) signaler and the your employee is the screener. 
D) screener and the owner of the coffee ship is the signaler. 
A) principal and the your employee is the agent. 
B) agent and the your employee is the principal. 
C) signaler and the your employee is the screener. 
D) screener and the owner of the coffee ship is the signaler.

Question 17

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.

Question 18

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 19

One property of Kenneth Arrow's "perfect" voting system is that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available. Arrow called this property

Accepted Answer

A) transitivity. 
B) pairwise perfection. 
C) independence of irrelevant alternatives. 
D) irrelevance of social choices. 
A) transitivity. 
B) pairwise perfection. 
C) independence of irrelevant alternatives. 
D) irrelevance of social choices.

Question 20

Table 22-17  
-Refer to Table 22-17. The table shows the preferences of 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 voter type is the median voter?

Accepted Answer

A) Type 1 
B) Type 2 
C) Type 3 
D) The median voter cannot be determined without knowing the pair of outcomes from which the voters will be choosing. 
A) Type 1 
B) Type 2 
C) Type 3 
D) The median voter cannot be determined without knowing the pair of outcomes from which the voters will be choosing.

Exam 22: Frontiers in Microeconomics

Informational asymmetry is a difference in

Studies of human decision-making show that

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

When asked to give a range for the height of the tallest mountain in North America such that people were 90 percent confident the true number falls within it, most people gave ranges that were

Which of the following is not correct?

Adverse selection may lead to

Signaling is an action taken by an uninformed party to induce an informed party to reveal information.

The median voter

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

Based on studies of human decision making, many people care more about the fairness of a game than about their personal winnings.

Table 22-6 -Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. In pairwise majority voting in which voters choose first between A and B and then choose between the winner of the first vote and C,

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

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This may be reducing sales. In this example, you are the

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

One property of Kenneth Arrow's "perfect" voting system is that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available. Arrow called this property

Table 22-17 -Refer to Table 22-17. The table shows the preferences of 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 voter type is the median voter?

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters