Question 1

Which of the following is a plausible explanation for a firm paying above-equilibrium wages to its workers?

Accepted Answer

A) It increases the probability that a worker who shirks will be caught. 
B) It discourages workers from shirking out of fear of losing their high-paying job. 
C) The Condorcet Paradox suggests that paying high wages will result in greater effort by employees. 
D) By paying a high wage, employers solve this adverse selection problem and motivate the employees to work harder. 
A) It increases the probability that a worker who shirks will be caught. 
B) It discourages workers from shirking out of fear of losing their high-paying job. 
C) The Condorcet Paradox suggests that paying high wages will result in greater effort by employees. 
D) By paying a high wage, employers solve this adverse selection problem and motivate the employees to work harder.

Question 2

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 on election day that the voters with a preference for less than $1.5 million do not show up to vote on a choice to spend either $2 million or $2.5 million. In this case, what is the preferred spending amount of the median voter (among those who actually cast a vote)?

Accepted Answer

A) $2 million and $2 million wins. 
B) $2 million, but $2.5 million wins. 
C) $2.5 million, and $2.5 million wins. 
D) $2.5 million, but $2 million wins. 
A) $2 million and $2 million wins. 
B) $2 million, but $2.5 million wins. 
C) $2.5 million, and $2.5 million wins. 
D) $2.5 million, but $2 million wins.

Question 3

Which of the following frontier areas of economics incorporates some findings from psychology into the study of economic issues?

Accepted Answer

A) asymmetric information 
B) political economy 
C) behavioral economics 
D) public economics 
A) asymmetric information 
B) political economy 
C) behavioral economics 
D) public economics

Question 4

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 5

The mathematical result showing that, under certain assumptions, there is no scheme for aggregating individual preferences into a valid set of social preferences is called

Accepted Answer

Arrow's im

Question 6

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 7

In view of the possible need for government action in markets where asymmetric information is a problem, which of the following is a valid concern?

Accepted Answer

A) The government rarely has more information than the private parties. 
B) Private markets can sometimes deal with information asymmetries on their own. 
C) The government is itself an imperfect institution. 
D) All of the above are valid concerns. 
A) The government rarely has more information than the private parties. 
B) Private markets can sometimes deal with information asymmetries on their own. 
C) The government is itself an imperfect institution. 
D) All of the above are valid concerns.

Question 8

​Economists have found that some risky behaviors increase and preventative medicine use decreases when individuals in the U.S. turn 65 and qualify for Medicare (public health insurance). This phenomenon is most consistent with which of the following concepts?

Accepted Answer

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

Question 9

Herbert Simon suggested that people are not rational maximizers but satisficers, meaning that they choose a course of action that is

Accepted Answer

A) personally satisfying, with a greater emphasis on personal consumption than on fairness. 
B) socially satisfying, with a greater emphasis on fairness than on personal consumption. 
C) good enough. 
D) risk averse. 
A) personally satisfying, with a greater emphasis on personal consumption than on fairness. 
B) socially satisfying, with a greater emphasis on fairness than on personal consumption. 
C) good enough. 
D) risk averse.

Question 10

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 elections were held where voters choose either Fred or Mary, and then choose either the winner or Beth, what would the results be?

Accepted Answer

A) Fred would win the first and second elections. 
B) Fred would win the first election and Beth would win the second election. 
C) Mary would win the first and second elections. 
D) Mary would win the first election and Beth would win the second election. 
A) Fred would win the first and second elections. 
B) Fred would win the first election and Beth would win the second election. 
C) Mary would win the first and second elections. 
D) Mary would win the first election and Beth would win the second election.

Question 11

Table 22-11
Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.  
-Refer to Table 22-11. Which pairwise voting scheme would result in outcome B?

Accepted Answer

A) First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B) First, choose between B and C. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and D. 
C) First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D) First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B. 
A) First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B) First, choose between B and C. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and D. 
C) First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D) First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B.

Question 12

If the seller of a used car offers a limited warranty, the warranty is an example of a(n)

Accepted Answer

A) signal. 
B) screen. 
C) efficiency wage. 
D) agent. 
A) signal. 
B) screen. 
C) efficiency wage. 
D) agent.

Question 13

Borda count is a voting method often used in polls that rank sports teams.

Accepted Answer

A) True 
 B)False

Question 14

Scenario 22-6
​
Shana owns a boutique that sells high-end women's clothing and accessories. Katie works part-time at the boutique and frequently is the only employee in this small store. Shana pays Katie a wage that is higher than the market wage for this type of job. When the store is not full of customers, Katie diligently works on displays and cleans to keep the store looking its best. Belinda is a customer in the store who asks Katie's opinion on the quality of some jeans she is considering purchasing. Katie tells her the quality is great even though she's had several other customers return them due to flaws. Magda is another customer who is returning a necklace without volunteering that a gem is missing.
-Refer to Scenario 22-2. Why do you suppose Shana pays Katie a wage higher than the market wage?

Accepted Answer

to avoid a

Question 15

Which of the following sets of preferences can not satisfy the property of transitivity?

Accepted Answer

A) Plan A is preferred to plan D. Plan D is preferred to plan B. Plan C is preferred to plan B. 
B) Plan A is preferred to plan B. Plan B is preferred to plan C. Plan A is preferred to plan C. 
C) Plan C is preferred to plan A. Plan B is preferred to plan A. Plan C is preferred to plan B. 
D) Plan D is preferred to plan C. Plan C is preferred to plan B. Plan B is preferred to plan D. 
A) Plan A is preferred to plan D. Plan D is preferred to plan B. Plan C is preferred to plan B. 
B) Plan A is preferred to plan B. Plan B is preferred to plan C. Plan A is preferred to plan C. 
C) Plan C is preferred to plan A. Plan B is preferred to plan A. Plan C is preferred to plan B. 
D) Plan D is preferred to plan C. Plan C is preferred to plan B. Plan B is preferred to plan D.

Question 16

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "transitivity" to mean

Accepted Answer

A) A beats B only if everyone prefers A to B. 
B) if everyone prefers A to B, then A beats B. 
C) if A beats B and B beats C, then A must beat C. 
D) everyone who is eligible to vote must vote; otherwise, the outcome is invalid. 
A) A beats B only if everyone prefers A to B. 
B) if everyone prefers A to B, then A beats B. 
C) if A beats B and B beats C, then A must beat C. 
D) everyone who is eligible to vote must vote; otherwise, the outcome is invalid.

Question 17

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 18

In a dictator game, player A must divide $100 between player A and player B. In this game, player B does not have the opportunity to reject an offer - he or she goes home with whatever player A offers. Experiments have observed that when player A splits the $100, he or she consistently offers over $10 to player B. Which of the following comments fits best.

Accepted Answer

A) Although player A is acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
B) Although player A is acting as economic theory usually assumes, he or she makes such offers although they are not fair. 
C) Although player A is not acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
D) Although player A is not acting as economic theory usually assumes, he or she makes such offers because they are not fair. 
A) Although player A is acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
B) Although player A is acting as economic theory usually assumes, he or she makes such offers although they are not fair. 
C) Although player A is not acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
D) Although player A is not acting as economic theory usually assumes, he or she makes such offers because they are not fair.

Question 19

Table 22-12
The following table shows the preferences for the five voters in a city regarding how to deal with the city's diseased trees.   A = do nothing
B = follow the expert's advice to remove every tree
C = remove every 4th tree now and perhaps more later
D = use an untested spraying alternative
-Refer to Table 22-12. Consider the public policy for dealing with the diseased trees. Using a Borda count with 4 points assigned to the first choice, 3 points assigned to the second choice, 2 points assigned to the third choice, and 1 point assigned to the fourth choice, which policy wins?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 20

Effective signals

Accepted Answer

A) convey useful information from informed parties to uninformed parties. 
B) impose little or no cost on the signaler. 
C) cannot be conveyed accurately when there is an information asymmetry. 
D) raise the quantity sold but reduce the price sellers receive. 
A) convey useful information from informed parties to uninformed parties. 
B) impose little or no cost on the signaler. 
C) cannot be conveyed accurately when there is an information asymmetry. 
D) raise the quantity sold but reduce the price sellers receive.

Exam 22: Frontiers in Microeconomics

Which of the following is a plausible explanation for a firm paying above-equilibrium wages to its workers?

Which of the following frontier areas of economics incorporates some findings from psychology into the study of economic issues?

The Condorcet paradox shows that

The mathematical result showing that, under certain assumptions, there is no scheme for aggregating individual preferences into a valid set of social preferences is called

Which of the following statements is not correct?

In view of the possible need for government action in markets where asymmetric information is a problem, which of the following is a valid concern?

​Economists have found that some risky behaviors increase and preventative medicine use decreases when individuals in the U.S. turn 65 and qualify for Medicare (public health insurance). This phenomenon is most consistent with which of the following concepts?

Herbert Simon suggested that people are not rational maximizers but satisficers, meaning that they choose a course of action that is

Table 22-11 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-11. Which pairwise voting scheme would result in outcome B?

If the seller of a used car offers a limited warranty, the warranty is an example of a(n)

Borda count is a voting method often used in polls that rank sports teams.

Which of the following sets of preferences can not satisfy the property of transitivity?

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "transitivity" to mean

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

Effective signals

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

Economists have found that some risky behaviors increase and preventative medicine use decreases when individuals in the U.S. turn 65 and qualify for Medicare (public health insurance). This phenomenon is most consistent with which of the following concepts?