Question 1

A difference in access to relevant knowledge is called information symmetry.

Accepted Answer

A) True 
 B)False

Question 2

Arrow identified unanimity and transitivity as desirable properties for a voting system.

Accepted Answer

A) True 
 B)False

Question 3

Experiments suggest that people:
(i) accurately estimate their own abilities
(ii) give an appropriate weight to a small number of vivid observations
(iii) interpret evidence to confirm beliefs they already have

Accepted Answer

A) (i) and (ii) 
B) (i) and (iii) 
C) (ii) and (iii) 
D) (iii) anly 
A) (i) and (ii) 
B) (i) and (iii) 
C) (ii) and (iii) 
D) (iii) anly

Question 4

What is moral hazard and how might it manifest in an employment relationship? What can an employer do to reduce the problem of moral hazard?

Accepted Answer

Moral hazard occurs when an agent perfor

Question 5

Suppose a consumer always goes to the same hairdresser to get her hair cut.Even after the hairdresser puts up the price of a cut by $5, the consumer doesn't switch to any hairdressers that are cheaper or more skilled.This means that the consumer is:

Accepted Answer

A) acting as a rational utility maximiser 
B) acting as a satisficer 
C) a victim of asymmetric information 
D) getting a loyalty discount from the hairdresser 
A) acting as a rational utility maximiser 
B) acting as a satisficer 
C) a victim of asymmetric information 
D) getting a loyalty discount from the hairdresser

Question 6

The field of information asymmetry:

Accepted Answer

A) tends to view human behaviour as less complex than that found in conventional economio theory 
B) brings some of the insights from psychology into the study of economic issues 
C) applies the tools of economics to understand the functioning of government 
D) includes topics such as adverse selection and moral hazard 
A) tends to view human behaviour as less complex than that found in conventional economio theory 
B) brings some of the insights from psychology into the study of economic issues 
C) applies the tools of economics to understand the functioning of government 
D) includes topics such as adverse selection and moral hazard

Question 7

People frequently interpret evidence in a way that conforms to their own prior beliefs.

Accepted Answer

A) True 
 B)False

Question 8

In insurance markets, buyers with:

Accepted Answer

A) low risk may choose to be uninsured, because the policies they are offered reflect their true characteristics 
B) low risk may choose to be insured, because the policies they are offered fail to reflect their true characteristics 
C) low risk may choose to be uninsured, because the policies they are offered fail to reflect their true characteristics 
D) high risk may choose to be insured, because the policies they are offered reflect their true characteristics 
A) low risk may choose to be uninsured, because the policies they are offered reflect their true characteristics 
B) low risk may choose to be insured, because the policies they are offered fail to reflect their true characteristics 
C) low risk may choose to be uninsured, because the policies they are offered fail to reflect their true characteristics 
D) high risk may choose to be insured, because the policies they are offered reflect their true characteristics

Question 9

When applied to the labour market, the adverse selection model suggests that:

Accepted Answer

A)  relatively talented workers are more likely to remain with a paiticular tirm if the firm cut: the wages it pays 
B)  firms have perfect knowledge about the ability of workers 
C)  a firm may choose to pay an above-equilibrium wage to attract a better mix of workers 
D)  all workers have identical abilities. 
A)  relatively talented workers are more likely to remain with a paiticular tirm if the firm cut: the wages it pays 
B)  firms have perfect knowledge about the ability of workers 
C)  a firm may choose to pay an above-equilibrium wage to attract a better mix of workers 
D)  all workers have identical abilities.

Question 10

In the moral hazard problem the principal tends to undertake less effort than the agent considers desirable.

Accepted Answer

A) True 
 B)False

Question 11

The field of political economy is:

Accepted Answer

A) the use of the methods of economics to study how government works 
B) the study of the economic consequences of political actions 
C) the study of economic policy made by government 
D) the study of the market for lobbying and political donations 
A) the use of the methods of economics to study how government works 
B) the study of the economic consequences of political actions 
C) the study of economic policy made by government 
D) the study of the market for lobbying and political donations

Question 12

An implication of the median voter theorem is that, in a democratic voting system:

Accepted Answer

A) minority views are not given much weight 
B) minority views are given significant weight 
C) the intensity of minority preferences play a central role in determining the outcome 
D) the outcome can best be described as a compromise that takes into account diverse preferences 
A) minority views are not given much weight 
B) minority views are given significant weight 
C) the intensity of minority preferences play a central role in determining the outcome 
D) the outcome can best be described as a compromise that takes into account diverse preferences

Question 13

A difference in access to relevant knowledge is called:

Accepted Answer

A) an information symmetiy 
B) an information asymmetiy 
C) signalling 
D) screening 
A) an information symmetiy 
B) an information asymmetiy 
C) signalling 
D) screening

Question 14

In the context of a voting system, unanimity means that:

Accepted Answer

A) if everyone prefers $ A $ to $ B $, then $ A $ should beat $ B $ 
B) if $ A $ beats $ B $, and $ B $ beats $ C $, then $ A $ should beat $ C $ 
C) the ranking between any two outcomes $ A $ and $ B $ should not depend on whether some third outcome $ C $ is also available 
D) there this no person that always gets his way, regardless of everyone else's preferences 
A) if everyone prefers $ A $ to $ B $, then $ A $ should beat $ B $ 
B) if $ A $ beats $ B $, and $ B $ beats $ C $, then $ A $ should beat $ C $ 
C) the ranking between any two outcomes $ A $ and $ B $ should not depend on whether some third outcome $ C $ is also available 
D) there this no person that always gets his way, regardless of everyone else's preferences

Question 15

Employers can reduce the incentive of imperfectly monitored workers to shirk by:

Accepted Answer

A)  better monitaring 
B)  lowrer wares 
C)   avoiding vear-end bonuses 
D)  mone of the monye 
A)  better monitaring 
B)  lowrer wares 
C)   avoiding vear-end bonuses 
D)  mone of the monye

Question 16

Sceptical buyers in the used car market:

Accepted Answer

A) are líkely to pay a relatively high price for a used car 
B) realise that asymmetric information is irrelevant in the used car market 
C) are likely to pay a relatively low price for a used car 
D) none of the above 
A) are líkely to pay a relatively high price for a used car 
B) realise that asymmetric information is irrelevant in the used car market 
C) are likely to pay a relatively low price for a used car 
D) none of the above

Question 17

In the context of a voting system, independence of irrelevant alternatives means that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.

Accepted Answer

A) True 
 B)False

Question 18

In the case where landlords require tenants to pay security deposits:

Accepted Answer

A) the landlord is the agent and the tenant is the principal 
B) the landlord is the principal and the tenant is the agent 
C) both the landlord and the tenant are agents 
D) both the landlord and the tenant are principals 
A) the landlord is the agent and the tenant is the principal 
B) the landlord is the principal and the tenant is the agent 
C) both the landlord and the tenant are agents 
D) both the landlord and the tenant are principals

Question 19

The median voter theorem is used to explain why parties in a two-party political system tend to put forward very different policies.

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.The situation that arises from pairwise voting with these preference is called:

Accepted Answer

A) inconsistent preferences 
B) the pairwaise paradox 
C) the Condorcet voting paradox 
D) the democratic preferences paradox 
A) inconsistent preferences 
B) the pairwaise paradox 
C) the Condorcet voting paradox 
D) the democratic preferences paradox

Exam 23: Frontiers of Microeconomics

A difference in access to relevant knowledge is called information symmetry.

Arrow identified unanimity and transitivity as desirable properties for a voting system.

Experiments suggest that people: (i) accurately estimate their own abilities (ii) give an appropriate weight to a small number of vivid observations (iii) interpret evidence to confirm beliefs they already have

What is moral hazard and how might it manifest in an employment relationship? What can an employer do to reduce the problem of moral hazard?

Suppose a consumer always goes to the same hairdresser to get her hair cut.Even after the hairdresser puts up the price of a cut by $5, the consumer doesn't switch to any hairdressers that are cheaper or more skilled.This means that the consumer is:

The field of information asymmetry:

People frequently interpret evidence in a way that conforms to their own prior beliefs.

In insurance markets, buyers with:

When applied to the labour market, the adverse selection model suggests that:

In the moral hazard problem the principal tends to undertake less effort than the agent considers desirable.

The field of political economy is:

An implication of the median voter theorem is that, in a democratic voting system:

A difference in access to relevant knowledge is called:

In the context of a voting system, unanimity means that:

Employers can reduce the incentive of imperfectly monitored workers to shirk by:

Sceptical buyers in the used car market:

In the context of a voting system, independence of irrelevant alternatives means that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.

In the case where landlords require tenants to pay security deposits:

The median voter theorem is used to explain why parties in a two-party political system tend to put forward very different policies.

Table 23 - 1 Rank Brent's preferences Frida's preferences Jess's preferences choice Daft Punk Najwa Karam Paul Kelly choice Paul Kelly Daft Punk Najwa Karam choice Najwa Karam Paul Kelly Daft Punk -Refer to Table 23-1.The situation that arises from pairwise voting with these preference is called:

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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