Exam 22: Frontiers in Microeconomics

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?

Ed promises his wife that he will mow the lawn on Saturday morning, but when Saturday morning arrives he changes his mind and says he will do it on Sunday. What insight about human behavior can be deduced from Ed's decision?

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

Insurance companies charge annual premiums to collect revenue, which they then use to pay customers who file claims for damages they incur. Because of the moral hazard problem insurance companies separate customers into groups. Group 1: customers who file few claims & Group 2: customers that file a lot of claims. After creating these groups, what happens to the average annual premium within a group?

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. If you want your employee to stop giving larger scoops to friends and relatives, which of the following is not a good approach?

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

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.

Suppose the voters in a small country are choosing between two options, A and B. After the voting is complete it is discovered that option A received 100% of the votes with option B receiving no votes. After the vote, however, the country's leader decides that option B is better for the people and implements B rather than A. The voting system in this country fails which of Arrow's properties of a desirable voting system?

Your city newspaper publishes a "Best of" poll that lists its readers' favorite restaurants. Mundo Bar and Grill is ranked as the best casual restaurant. Your best friend had dinner at Mundo Bar and Grill last week and commented that the food was mediocre and the service was slow. You decide not to have dinner at Mundo Bar and Grill based on your friend's experience. Your decision illustrates that people

Which of the following is not an example of a principal-agent relationship?

A college professor hires a student to babysit her children and pays the student an efficiency-wage. Which of the following is correct about the wage the student earns?

What is the name of the mathematical result showing that no voting system can simultaneously satisfy the properties of unanimity, transitivity, independence of irrelevant alternatives, and no dictators?

Bill would like to buy a gift for Ann to convey his love for her. Which of the following areas of economics would most likely study this type of decision?

Table 22-15 Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below. -Refer to Table 22-15. If 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,

Which of the following is an example of informational asymmetry?

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. If (1) the first vote pits "library" against "recreation center," and (2) the second vote pits "arena" against the winner of the first vote, then the outcome is as follows:

Scenario 22-1 Esteban and Michaela own an apartment building. They hire Nico to manage the building and deal with tenants' complaints. They also hire Ted to make any necessary repairs to the apartments or the common area and they hire Rex to be the door guard at night. -Refer to Scenario 22-1. Which of the following statements is correct?

As an alternative to pairwise majority voting, each voter could be asked to rank the possible outcomes, giving 1 point to her lowest choice, 2 points to her second-lowest choice, 3 points to her third-lowest choice, and so on. This voting method is called a(n)

Table 22-6 -Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. Which of the following statements is true?

Lindsay and Tim are playing the ultimatum game starting with $100. Based on the coin toss, Lindsay is the player to propose a division of the $100. If Lindsay acts as economic theory assumes, she should propose that