Exam 22: Frontiers in Microeconomics

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

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

Table 22-8 ​ The citizens of Mayville are having a severe budget shortage and are faced with eliminating athletics from the town high school. The town administrator has determined that the town can afford to maintain one sport. 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 22-8. If the town administrator asks voters to choose first between basketball and football and then between the winner of the first vote and hockey, which sport will win the final vote?

Table 22-1 Three friends-Stephanie, Stella, and Lydia-are deciding where to go together for vacation. They all agree that they should go to one of the three places: Italy, Spain, or Hawaii. They also agree that they will have two pairwise votes to determine where to go on vacation, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the following table. ​ ​ Stephanie Stella Lydia First choice Italy Spain Hawaii Second choice Spain Hawaii Italy Third choice Hawaii Italy Spain -Refer to Table 22-1. If the first vote pits Italy against Spain and the second vote pits Hawaii against the winner of the first vote, then the outcome is as follows:

Asymmetric information