Question 1

If Anne finds it difficult to stick to a diet, she might be exhibiting:

Accepted Answer

A) inconsistency over time 
B) asymmetric information 
C) moral hazard 
D) adverse selection 
A) inconsistency over time 
B) asymmetric information 
C) moral hazard 
D) adverse selection

Question 2

In the moral hazard problem the:

Accepted Answer

A)  agent tends to undertake more effart than the principal considers desirable 
B)  agent tends to undertake less effort than the principle considers desirable 
C)  problem of asymmetric information is absent 
D)  agent does not exhibit ary 'underirable' beheviour 
A)  agent tends to undertake more effart than the principal considers desirable 
B)  agent tends to undertake less effort than the principle considers desirable 
C)  problem of asymmetric information is absent 
D)  agent does not exhibit ary 'underirable' beheviour

Question 3

The median voter theorem suggests that democratic institutions will produce the outcome desired by the median voter, regardless of the preferences of the rest of the electorate.

Accepted Answer

A) True 
 B)False

Question 4

An implication of asymmetric information in the insurance market is that:

Accepted Answer

A)  insurance comparaes have perfect konowlede about the health problems of those who purchase insurance 
B)  the price of health insurance may reflect the costs of a healthier-than-everage person 
C)  peaple with preater hidenen health prablems are mare ligely to buy health insurance than other people 
D)  people in average health are encauraged to purchase health insurance 
A)  insurance comparaes have perfect konowlede about the health problems of those who purchase insurance 
B)  the price of health insurance may reflect the costs of a healthier-than-everage person 
C)  peaple with preater hidenen health prablems are mare ligely to buy health insurance than other people 
D)  people in average health are encauraged to purchase health insurance

Question 5

Table 23 - 2
 $\begin{array}{|l|l|l|l|}\hline&&\text { Voter Type }\
\hline &\text { Type 1 } & \text { Type 2 } & \text { Type 3 } \
\hline \% \text { of electorate }&35 & 45 & 20 \
\hline 1^{\text {st }} \text { choice }&\text { C } & \text { A } & \text { B } \
\hline 2^{\text {nd }} \text { choice }&\text { A } & \text { B } & \text { C } \
\hline 3^{\mathrm{rd}} \text { choice }&\text { B } & \text { C } & \text { A } \
\hline
\end{array}$ Suppose a town is to vote on three possible locations for a new park: A, B, or C.The preferences are in table 23-2.Suppose the mayor decides on the following Borda count voting scheme: For each option, we will give one point for last place, two points for second last, and three points for the third last etc.The outcome with the most points is the winner.
-Refer to the information provided.Suppose option B is no longer an alternative.The winner of this Borda count will be:

Accepted Answer

A)  optinan A 
B)  aption $B$ 
C)  aption C 
D)  a tie between aption $A$ and $C$ 
A)  optinan A 
B)  aption $B$ 
C)  aption C 
D)  a tie between aption $A$ and $C$

Question 6

Politicians are never motivated by self-interest.

Accepted Answer

A) True 
 B)False

Question 7

If there is adverse selection in the health insurance market then this means that:

Accepted Answer

A)  insurance companes can identify all the health problems facing its custamers 
B)  the price of health insurance may be greater than the costs of cavering the average person's health risks 
C)  peaple winth 5evere but hidden health problems areless likely to buy health insurance than ather peaple 
D)  people in average health are encauraged to purchase health insurance 
A)  insurance companes can identify all the health problems facing its custamers 
B)  the price of health insurance may be greater than the costs of cavering the average person's health risks 
C)  peaple winth 5evere but hidden health problems areless likely to buy health insurance than ather peaple 
D)  people in average health are encauraged to purchase health insurance

Question 8

Private insurance companies cannot do anything to reduce the impact of the moral hazard problem.

Accepted Answer

A) True 
 B)False

Question 9

Studies suggest that the passage of time makes no difference to individuals' choices between two options.

Accepted Answer

A) True 
 B)False

Question 10

People tend to underestimate their own abilities.

Accepted Answer

A) True 
 B)False

Question 11

The tendency for a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behaviour is known as:

Accepted Answer

A)  asthmetric informetion 
B)  moral hazard 
C)  moral delinquency 
D)  aberse selection 
A)  asthmetric informetion 
B)  moral hazard 
C)  moral delinquency 
D)  aberse selection

Question 12

When analysing labour and used car markets, economists recognise the existence of:

Accepted Answer

A) hidden action 
B) hidden characteristics 
C) none of the above 
D) all of the above 
A) hidden action 
B) hidden characteristics 
C) none of the above 
D) all of the above

Question 13

Economists tend to:

Accepted Answer

A) try to expand their understanding of human behaviour and society 
B) ignore the workings of political institutions 
C) tend to assume no hidden actions or characteristics when analysing insurance, labour and used car markets 
D) all of the above 
A) try to expand their understanding of human behaviour and society 
B) ignore the workings of political institutions 
C) tend to assume no hidden actions or characteristics when analysing insurance, labour and used car markets 
D) all of the above

Question 14

The incentive of imperfectly monitored workers to shirk can be reduced by:

Accepted Answer

A)  higher levels of monitaring and offerng year-end bonuses 
B)  higher levels of moritarin and lower waes 
C)  lower levels of monitaring and offering year-end bonuses 
D)  lower levels of monitarin and lower wages 
A)  higher levels of monitaring and offerng year-end bonuses 
B)  higher levels of moritarin and lower waes 
C)  lower levels of monitaring and offering year-end bonuses 
D)  lower levels of monitarin and lower wages

Question 15

Which of the following can help solve the moral hazard inherit in the employer-employee relationship:
i. higher wages
ii. more monitoring
iii division of employee responsibilities:

Accepted Answer

A)  (i) and (i) anly 
B)  (ii) and (ii) any 
C)  (i), (ii) and (ii) 
D)  (ii) any 
A)  (i) and (i) anly 
B)  (ii) and (ii) any 
C)  (i), (ii) and (ii) 
D)  (ii) any

Question 16

Insurance companies have perfect knowledge about the health problems of those who purchase insurance due to asymmetric information in the insurance market.

Accepted Answer

A) True 
 B)False

Question 17

Suppose an insurance company successfully screens drivers by offering two contracts.One contract is a policy with high premiums and comprehensive coverage, and the other a policy with low premiums and $1500 excess on each claim.This means that:

Accepted Answer

A) risky drivers and safe drivers would both select the high premium contract 
B) risky drivers would select the high premium contract and safe drivers would select the low premium contract 
C) risky drivers would select the low premium contract and safe drivers would select the high premium contract 
D) risky drivers and safe drivers would both select the low premium contract 
A) risky drivers and safe drivers would both select the high premium contract 
B) risky drivers would select the high premium contract and safe drivers would select the low premium contract 
C) risky drivers would select the low premium contract and safe drivers would select the high premium contract 
D) risky drivers and safe drivers would both select the low premium contract

Question 18

Which of the following statements are implications of the lemons problem in the used car market?
(i) many people avoid buying vehicles in this market
(ii) used cars have a market value much less than that of new cars
(iii) buyers are just as aware of a used car's defects as sellers

Accepted Answer

A)  (I) any 
B)  (i) and (ii) 
C)  (i) and (iii) 
D)  (ii) and (iii) 
A)  (I) any 
B)  (i) and (ii) 
C)  (i) and (iii) 
D)  (ii) and (iii)

Question 19

The Borda count voting method satisfies the independence of irrelevant alternatives property.

Accepted Answer

A) True 
 B)False

Question 20

In markets with informational asymmetries, the more informed party will never want to reveal their informational advantage.

Accepted Answer

A) True 
 B)False

Exam 23: Frontiers of Microeconomics

If Anne finds it difficult to stick to a diet, she might be exhibiting:

In the moral hazard problem the:

The median voter theorem suggests that democratic institutions will produce the outcome desired by the median voter, regardless of the preferences of the rest of the electorate.

An implication of asymmetric information in the insurance market is that:

Politicians are never motivated by self-interest.

If there is adverse selection in the health insurance market then this means that:

Private insurance companies cannot do anything to reduce the impact of the moral hazard problem.

Studies suggest that the passage of time makes no difference to individuals' choices between two options.

People tend to underestimate their own abilities.

The tendency for a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behaviour is known as:

When analysing labour and used car markets, economists recognise the existence of:

Economists tend to:

The incentive of imperfectly monitored workers to shirk can be reduced by:

Which of the following can help solve the moral hazard inherit in the employer-employee relationship: i. higher wages ii. more monitoring iii division of employee responsibilities:

Insurance companies have perfect knowledge about the health problems of those who purchase insurance due to asymmetric information in the insurance market.

Suppose an insurance company successfully screens drivers by offering two contracts.One contract is a policy with high premiums and comprehensive coverage, and the other a policy with low premiums and $1500 excess on each claim.This means that:

Which of the following statements are implications of the lemons problem in the used car market? (i) many people avoid buying vehicles in this market (ii) used cars have a market value much less than that of new cars (iii) buyers are just as aware of a used car's defects as sellers

The Borda count voting method satisfies the independence of irrelevant alternatives property.

In markets with informational asymmetries, the more informed party will never want to reveal their informational advantage.

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

Filters