Question 1

Jane spends 85% of her income each year, even though she knows she should be saving 20% for retirement. Jane's behavior indicates that her behavior tends to be

Accepted Answer

A) irrational. 
B) inconsistent over time. 
C) satisficing rather than maximizing. 
D) undefined. 
A) irrational. 
B) inconsistent over time. 
C) satisficing rather than maximizing. 
D) undefined.

Question 2

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?

Accepted Answer

A) In a pairwise election, "arena" beats "library." 
B) In a pairwise election, "library" beats "recreation center." 
C) In a pairwise election, "recreation center" beats "arena." 
D) All of the above are correct. 
A) In a pairwise election, "arena" beats "library." 
B) In a pairwise election, "library" beats "recreation center." 
C) In a pairwise election, "recreation center" beats "arena." 
D) All of the above are correct.

Question 3

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 4

Political leaders are always aiming for an optimal combination of efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is correct?

Accepted Answer

A) Based on studies of human decision making, most people are overconfident in their own abilities. 
B) Arrow's impossibility theorem disproves the median voter theorem. 
C) Romantic gifts are an example of adverse selection. 
D) An efficiency wage encourages workers to shirk. 
A) Based on studies of human decision making, most people are overconfident in their own abilities. 
B) Arrow's impossibility theorem disproves the median voter theorem. 
C) Romantic gifts are an example of adverse selection. 
D) An efficiency wage encourages workers to shirk.

Question 6

A home has been on the market for an extended amount of time without much interest from buyers. The sellers decide to purchase and include a home warranty insuring against major defects with the home. The warranty is an example of a(n)

Accepted Answer

A) signal. 
B) screen. 
C) moral hazard. 
D) adverse selection. 
A) signal. 
B) screen. 
C) moral hazard. 
D) adverse selection.

Question 7

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 8

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. The travelers decide to conduct pairwise voting with the majority determining the outcome of each vote to decide their next move. If they first choose between going left and going right, and then choose between the winner of the first vote and going straight, which direction will they go?

Accepted Answer

The answer of Table 22-25
Sophie, Huan, and Santiago are lost...

Question 9

Table 22-14
Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired.   '
-Refer to Table 22-14. Adams calls and says she's accepted another position. In which case does Campbell win against Brown?

Accepted Answer

A) both a pairwise vote and a Borda Count vote 
B) a pairwise vote, but not a Borda Count vote 
C) a Borda Count vote, but not a pairwise vote 
D) neither a Borda Count vote, nor a pairwise vote 
A) both a pairwise vote and a Borda Count vote 
B) a pairwise vote, but not a Borda Count vote 
C) a Borda Count vote, but not a pairwise vote 
D) neither a Borda Count vote, nor a pairwise vote

Question 10

The tendency of many people to procrastinate supports the view that people are consistent over time.

Accepted Answer

A) True 
 B)False

Question 11

If the median voter theorem holds,

Accepted Answer

A) a Borda count will violate the principle of transitivity. 
B) the Condorcet paradox also holds. 
C) minority views will not receive much consideration. 
D) All of the above are correct. 
A) a Borda count will violate the principle of transitivity. 
B) the Condorcet paradox also holds. 
C) minority views will not receive much consideration. 
D) All of the above are correct.

Question 12

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

Accepted Answer

Asymmetric information is present when t

Question 13

​Real estate agents have been found to keep their own homes on the market longer and sell their homes for more than comparable homes of the individuals they represent. This phenomenon is best described by which of the following concepts?

Accepted Answer

A) ​Adverse selection 
B) ​Moral hazard 
C) ​Availability bias 
D) ​Time inconsistency 
A) ​Adverse selection 
B) ​Moral hazard 
C) ​Availability bias 
D) ​Time inconsistency

Question 14

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 15

Adverse selection can only occur when there is asymmetric information​.

Accepted Answer

A) True 
 B)False

Question 16

Anthony and Addie are playing the ultimatum game, starting with $100. The coin flip results in Anthony being the one to propose a division of the $100. Anthony proposes that he gets $99 and Addie gets $1. Which of the following statements is correct?

Accepted Answer

A) Because the 99-1 split isn't fair, Anthony should not make this offer. 
B) Conventional economic theory predicts that Anthony will propose a 99-1 split, just as he did. 
C) Experimental evidence suggests that Addie will accept the 99-1 split because, even though it isn't fair, it's better than nothing. 
D) Economic theory predicts that Anthony should choose a 60-40 split to maximize his payoff. 
A) Because the 99-1 split isn't fair, Anthony should not make this offer. 
B) Conventional economic theory predicts that Anthony will propose a 99-1 split, just as he did. 
C) Experimental evidence suggests that Addie will accept the 99-1 split because, even though it isn't fair, it's better than nothing. 
D) Economic theory predicts that Anthony should choose a 60-40 split to maximize his payoff.

Question 17

"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 18

An implication of the median voter theorem is that

Accepted Answer

A) minority views and majority views are given equal weight. 
B) platforms of the major political parties will not differ greatly. 
C) the logic of democracy is fundamentally flawed. 
D) behavioral economics plays a significant role in voting outcomes. 
A) minority views and majority views are given equal weight. 
B) platforms of the major political parties will not differ greatly. 
C) the logic of democracy is fundamentally flawed. 
D) behavioral economics plays a significant role in voting outcomes.

Question 19

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. Vinny recommends using a vote by majority rule and wants to be sure that his first choice becomes the winner. Which order should he should propose to use for pairwise voting to ensure his desired outcome?

Accepted Answer

A) first choosing between ravioli and spaghetti, then choosing between the winner of the first vote and pizza, and finally choosing between the winner of the second vote and lasagne 
B) first choosing between pizza and spaghetti, then choosing between the winner of the first vote and lasagne, and finally choosing between the winner of the second vote and ravioli 
C) first choosing between lasagne and pizza, then choosing between the winner of the first vote and ravioli, and finally choosing between the winner of the second vote and spaghetti 
D) None of the proposed voting orders will result in Vinny's first choice winning the vote. 
A) first choosing between ravioli and spaghetti, then choosing between the winner of the first vote and pizza, and finally choosing between the winner of the second vote and lasagne 
B) first choosing between pizza and spaghetti, then choosing between the winner of the first vote and lasagne, and finally choosing between the winner of the second vote and ravioli 
C) first choosing between lasagne and pizza, then choosing between the winner of the first vote and ravioli, and finally choosing between the winner of the second vote and spaghetti 
D) None of the proposed voting orders will result in Vinny's first choice winning the vote.

Question 20

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 and the vote were conducted according to a Borda count system where each person's first choice receives 3 points, second choice 2 points, and third choice 1 point, the election winner would be

Accepted Answer

A) pizza. 
B) spaghetti 
C) lasagne. 
D) The result would be a three-way tie between pizza, spaghetti and lasagne. 
A) pizza. 
B) spaghetti 
C) lasagne. 
D) The result would be a three-way tie between pizza, spaghetti and lasagne.

Exam 22: Frontiers in Microeconomics

Jane spends 85% of her income each year, even though she knows she should be saving 20% for retirement. Jane's behavior indicates that her behavior tends to be

Which of the following statements is not correct?

Political leaders are always aiming for an optimal combination of efficiency and equality.

Which of the following statements is correct?

A home has been on the market for an extended amount of time without much interest from buyers. The sellers decide to purchase and include a home warranty insuring against major defects with the home. The warranty is an example of a(n)

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

Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. ' -Refer to Table 22-14. Adams calls and says she's accepted another position. In which case does Campbell win against Brown?

The tendency of many people to procrastinate supports the view that people are consistent over time.

If the median voter theorem holds,

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

​Real estate agents have been found to keep their own homes on the market longer and sell their homes for more than comparable homes of the individuals they represent. This phenomenon is best described by which of the following concepts?

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

Adverse selection can only occur when there is asymmetric information​.

Anthony and Addie are playing the ultimatum game, starting with $100. The coin flip results in Anthony being the one to propose a division of the $100. Anthony proposes that he gets $99 and Addie gets $1. Which of the following statements is correct?

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

An implication of the median voter theorem is that

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

Real estate agents have been found to keep their own homes on the market longer and sell their homes for more than comparable homes of the individuals they represent. This phenomenon is best described by which of the following concepts?

Adverse selection can only occur when there is asymmetric information.