Question 1

If monitoring by a principal is imperfect, it is less likely that a moral hazard problem will arise.

Accepted Answer

A) True 
 B)False

Question 2

Economists:

Accepted Answer

A) have always suggested that people are rational maximisers, not satisfiers 
B) use basic psychological insights in the field of behavioural economics 
C) generally argue that people do not weigh the costs and benefits of different courses of action 
D) assume individuals and firms dont face constraints in the market 
A) have always suggested that people are rational maximisers, not satisfiers 
B) use basic psychological insights in the field of behavioural economics 
C) generally argue that people do not weigh the costs and benefits of different courses of action 
D) assume individuals and firms dont face constraints in the market

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

An implication of the median voter theorem is that, in a democratic voting system, minority views are given significant weight.

Accepted Answer

A) True 
 B)False

Question 5

The insights of behavioural economics suggest that assuming rational behaviour of consumers is not always correct.

Accepted Answer

A) True 
 B)False

Question 6

The Condorcet paradox illustrates how:

Accepted Answer

A) choice of voting order has no impact on the outcome of a democratic election 
B) majority voting by itself can tell us what outcome of society really wants 
C) choice of voting order can have an impact on the outcome of a democratic election 
D) aggregating individual preferences into preferences for society as a whole is relatively straightforward. 
A) choice of voting order has no impact on the outcome of a democratic election 
B) majority voting by itself can tell us what outcome of society really wants 
C) choice of voting order can have an impact on the outcome of a democratic election 
D) aggregating individual preferences into preferences for society as a whole is relatively straightforward.

Question 7

The social scientist Herbert Simon is famous for his work in:

Accepted Answer

A) asymmetric information 
B) signalling theory 
C) voting systems 
D) behavioural economics 
A) asymmetric information 
B) signalling theory 
C) voting systems 
D) behavioural economics

Question 8

Information asymmetries do not impede the efficient functioning of markets.

Accepted Answer

A) True 
 B)False

Question 9

According to the median voter theorem, majority rule will produce the outcome:

Accepted Answer

A) least preferred by the voter exactly in the middle of a distribution 
B) that represents everyone's preferences equally 
C) most preferred by the voter at an extreme end of the distribution 
D) most preferred by the voter exactly in the middle of a distribution 
A) least preferred by the voter exactly in the middle of a distribution 
B) that represents everyone's preferences equally 
C) most preferred by the voter at an extreme end of the distribution 
D) most preferred by the voter exactly in the middle of a distribution

Question 10

Studies suggest that:

Accepted Answer

A) the passage of time malkes no difference to individuals' choices between two options 
B) individuals' choices may be inconsistent over time 
C) individuals' choices are always consistent over time 
D) none of the above 
A) the passage of time malkes no difference to individuals' choices between two options 
B) individuals' choices may be inconsistent over time 
C) individuals' choices are always consistent over time 
D) none of the above

Question 11

Which of the following is an example of adverse selection?

Accepted Answer

A)  emplayees shirang because they beleve they can get awray with reduced wrark 
B)  a traveller who is prane to forgetting her bags purchasing full-camprehensive tavel insurance 
C)  a well-infarmed IT exquert purchasing a new laptop 
D)  apetal station displaying its prices alongside a busy highway 
A)  emplayees shirang because they beleve they can get awray with reduced wrark 
B)  a traveller who is prane to forgetting her bags purchasing full-camprehensive tavel insurance 
C)  a well-infarmed IT exquert purchasing a new laptop 
D)  apetal station displaying its prices alongside a busy highway

Question 12

Behavioural economists argue that:

Accepted Answer

A) people are rational maximisers 
B) consumers always choose the best possible course of action 
C) people are flexible and change their beliefs in response to new evidence 
D) people largely make decisions that are merely good enough 
A) people are rational maximisers 
B) consumers always choose the best possible course of action 
C) people are flexible and change their beliefs in response to new evidence 
D) people largely make decisions that are merely good enough

Question 13

Loss aversion means that commitment strategies that generate potential losses are more likely to change behaviour than strategies that generate the equivalent money gain.

Accepted Answer

A) True 
 B)False

Question 14

Table 23 - 1
 $\begin{array}{|l|l|l|l|}
\hline \text { Rank }&\text { Brent's preferences } & \text { Frida's preferences } & \text { Jess's preferences } \
\hline 1^{\text {st }} \text { choice }&\text { Daft Punk } & \text { Najwa Karam } & \text { Paul Kelly } \
\hline 2^{1 \mathrm{nd}} \text { choice }&\text { Paul Kelly } & \text { Daft Punk } & \text { Najwa Karam } \
\hline 3^{\text {rd }} \text { choice }&\text { Najwa Karam } & \text { Paul Kelly } & \text { Daft Punk } \
\hline
\end{array}$
-Refer to Table 23-1.With pairwise voting, and starting with a comparison between Daft Punk and Najwa Karam, which album will they listen to?

Accepted Answer

A) Daft PunK 
B) Paul Kelly 
C) Najwa Karam 
D) it cannot be determined 
A) Daft PunK 
B) Paul Kelly 
C) Najwa Karam 
D) it cannot be determined

Question 15

It is often difficult for a customer to know the quality of a 3-D television.If a television manufacturer advertises its 3-D televisions then:

Accepted Answer

A)  this i5 a costles5 action that fals to 51gnal the 3-D televion is a good product 
B)  this is a costless action that succeeds in simanling that the 3-D televisidn is a good prochuct 
C)  this is a costly action that succeeds in signalling that the 3 -D television is a good product 
D)  this is a costly action that fails to sipnal the 3 -D television is a pood product 
A)  this i5 a costles5 action that fals to 51gnal the 3-D televion is a good product 
B)  this is a costless action that succeeds in simanling that the 3-D televisidn is a good prochuct 
C)  this is a costly action that succeeds in signalling that the 3 -D television is a good product 
D)  this is a costly action that fails to sipnal the 3 -D television is a pood product

Question 16

Herbert Simon suggested that people should be treated as satisficers rather than rational maximisers.

Accepted Answer

A) True 
 B)False

Question 17

Table 23 - 1
 $\begin{array}{|l|l|l|l|}
\hline \text { Rank }&\text { Brent's preferences } & \text { Frida's preferences } & \text { Jess's preferences } \
\hline 1^{\text {st }} \text { choice }&\text { Daft Punk } & \text { Najwa Karam } & \text { Paul Kelly } \
\hline 2^{1 \mathrm{nd}} \text { choice }&\text { Paul Kelly } & \text { Daft Punk } & \text { Najwa Karam } \
\hline 3^{\text {rd }} \text { choice }&\text { Najwa Karam } & \text { Paul Kelly } & \text { Daft Punk } \
\hline
\end{array}$
-Refer to Table 23-1.With pairwise voting, and starting with a comparison between Daft Punk and Paul Kelly, which album will they listen to?

Accepted Answer

A) Daft Punls 
B) Paul Kelly 
C) Najwa Karam 
D) it cannot be determined 
A) Daft Punls 
B) Paul Kelly 
C) Najwa Karam 
D) it cannot be determined

Question 18

Political economy is also referred to as public:

Accepted Answer

A) goods 
B) choice 
C) provision 
D) policy 
A) goods 
B) choice 
C) provision 
D) policy

Question 19

Given asymmetric information, car insurance companies might encourage risky drivers to identify themselves by offering a high-premium policy without a deductible.

Accepted Answer

A) True 
 B)False

Question 20

Table 23 - 1
 $\begin{array}{|l|l|l|l|}
\hline \text { Rank }&\text { Brent's preferences } & \text { Frida's preferences } & \text { Jess's preferences } \
\hline 1^{\text {st }} \text { choice }&\text { Daft Punk } & \text { Najwa Karam } & \text { Paul Kelly } \
\hline 2^{1 \mathrm{nd}} \text { choice }&\text { Paul Kelly } & \text { Daft Punk } & \text { Najwa Karam } \
\hline 3^{\text {rd }} \text { choice }&\text { Najwa Karam } & \text { Paul Kelly } & \text { Daft Punk } \
\hline
\end{array}$
-Refer to Table 23-1.With pairwise voting, and starting with a comparison between Paul Kelly and Najwa Karam, which album will they listen to?

Accepted Answer

A) Daft PunK 
B) Paul Kelly 
C) Najwa Karam 
D) it cannot be determined 
A) Daft PunK 
B) Paul Kelly 
C) Najwa Karam 
D) it cannot be determined

Exam 23: Frontiers of Microeconomics

If monitoring by a principal is imperfect, it is less likely that a moral hazard problem will arise.

Economists:

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

An implication of the median voter theorem is that, in a democratic voting system, minority views are given significant weight.

The insights of behavioural economics suggest that assuming rational behaviour of consumers is not always correct.

The Condorcet paradox illustrates how:

The social scientist Herbert Simon is famous for his work in:

Information asymmetries do not impede the efficient functioning of markets.

According to the median voter theorem, majority rule will produce the outcome:

Studies suggest that:

Which of the following is an example of adverse selection?

Behavioural economists argue that:

Loss aversion means that commitment strategies that generate potential losses are more likely to change behaviour than strategies that generate the equivalent money gain.

It is often difficult for a customer to know the quality of a 3-D television.If a television manufacturer advertises its 3-D televisions then:

Herbert Simon suggested that people should be treated as satisficers rather than rational maximisers.

Political economy is also referred to as public:

Given asymmetric information, car insurance companies might encourage risky drivers to identify themselves by offering a high-premium policy without a deductible.

Ten Lessons From 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

Application: 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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