Question 1

Studies of human decision-making have detected systematic mistakes that people make.Which of the following have been detected?

Accepted Answer

A)  people are overconfident 
B)  people give too much weight to a small number of vivid observations 
C)  people are reluctant to change their minds 
D)  All of the above are correct. 
A)  people are overconfident 
B)  people give too much weight to a small number of vivid observations 
C)  people are reluctant to change their minds 
D)  All of the above are correct.

Question 2

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night,it is an example of

Accepted Answer

A)  both moral hazard and adverse selection. 
B)  neither moral hazard nor adverse selection. 
C)  moral hazard, but not adverse selection. 
D)  adverse selection, but not moral hazard. 
A)  both moral hazard and adverse selection. 
B)  neither moral hazard nor adverse selection. 
C)  moral hazard, but not adverse selection. 
D)  adverse selection, but not moral hazard.

Question 3

Suppose that residents of a town are asked to vote on the best day to improve the safety of an intersection.The three choices are: a stoplight,a 4-way stop,and a 2-way stop.The mayor asks the residents to assign 3 points to their first choice,2 points to their second choice,and 1 point to their last choice.The intersection will be controlled by the method that receives the most points.This voting scheme is called

Accepted Answer

A)  Arrow's impossibility theorem. 
B)  the Condorcet paradox. 
C)  a Borda count. 
D)  the median voter theorem. 
A)  Arrow's impossibility theorem. 
B)  the Condorcet paradox. 
C)  a Borda count. 
D)  the median voter theorem.

Question 4

A person who makes decisions that are "merely good enough" is called a(n)

Accepted Answer

A)  optimizer. 
B)  rational person. 
C)  satisficer. 
D)  maxi-minimizer. 
A)  optimizer. 
B)  rational person. 
C)  satisficer. 
D)  maxi-minimizer.

Question 5

Table 22-10
Three family members -- Seamus, Maeve, and Siobhan -- are deciding what type of movie to attend. The three choices are an action adventure, comedy, or horror. The first, second, and third choices for each person are as indicated in the table below.
  
-Refer to Table 22-10.Suppose the three decide to make the decision based on pairwise majority voting.If they first choose between Action and Comedy and then choose between the winner of the first vote and Horror,which movie alternative will win?

Accepted Answer

A)  Action 
B)  Comedy 
C)  Horror 
D)  There is no clear winner - Comedy and Horror will tie. 
A)  Action 
B)  Comedy 
C)  Horror 
D)  There is no clear winner - Comedy and Horror will tie.

Question 6

Which of the following sets of preferences satisfies the property of transitivity?

Accepted Answer

A)  Cookies are preferred to brownies. Brownies are preferred to ice cream. Ice cream is preferred to cookies. 
B)  Cookies are preferred to pie. Brownies are preferred to pie. Pie is preferred to cookies. 
C)  Cookies are preferred to ice cream. Ice cream is preferred to brownies. Cookies are preferred to brownies. 
D)  Cookies are preferred to pie. Ice cream is preferred to cookies. Pie is preferred to ice cream. 
A)  Cookies are preferred to brownies. Brownies are preferred to ice cream. Ice cream is preferred to cookies. 
B)  Cookies are preferred to pie. Brownies are preferred to pie. Pie is preferred to cookies. 
C)  Cookies are preferred to ice cream. Ice cream is preferred to brownies. Cookies are preferred to brownies. 
D)  Cookies are preferred to pie. Ice cream is preferred to cookies. Pie is preferred to ice cream.

Question 7

If you are assigned the role of Player A in the Ultimatum game and you propose that player B gets $1 and you get $99

Accepted Answer

A)  you are behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
B)  you are behaving as a rational wealth-maximizer and player B is likely to reject your offer. 
C)  you are not behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
D)  you are not behaving as a rational wealth-maximizer and player B is likely to reject your offer. 
A)  you are behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
B)  you are behaving as a rational wealth-maximizer and player B is likely to reject your offer. 
C)  you are not behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
D)  you are not behaving as a rational wealth-maximizer and player B is likely to reject your offer.

Question 8

Economists use basic psychological insights in the field of study called

Accepted Answer

A)  psychological economics. 
B)  transitional economics. 
C)  behavioral economics. 
D)  social economics. 
A)  psychological economics. 
B)  transitional economics. 
C)  behavioral economics. 
D)  social economics.

Question 9

Government action in cases of asymmetric information may not be an ideal solution because

Accepted Answer

A)  the private market can sometimes deal with information asymmetries on its own. 
B)  the government tends to have more information than private parties. 
C)  both (a) and (b). 
D)  None of the above is correct. 
A)  the private market can sometimes deal with information asymmetries on its own. 
B)  the government tends to have more information than private parties. 
C)  both (a) and (b). 
D)  None of the above is correct.

Question 10

Scenario 22-4
Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection. The three choices are: a stoplight, a 4-way stop, and a 2-way stop. The voters are divided into three groups based on their preferences.
Voter Type
  
-Refer to Scenario 22-4.If the first vote pits a 2-way stop against a 4-way stop and the second vote pits a stoplight against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A)  2-way stop wins the first vote and 2-way stop wins the second vote, so the town installs a 2-way stop. 
B)  2-way stop wins the first vote and stoplight wins the second vote, so the town installs a stoplight. 
C)  4-way stop wins the first vote and 4-way stop wins the second vote, so the town installs a 4-way stop. 
D)  4-way stop wins the first vote and stoplight wins the second vote, so the town installs a stoplight. 
A)  2-way stop wins the first vote and 2-way stop wins the second vote, so the town installs a 2-way stop. 
B)  2-way stop wins the first vote and stoplight wins the second vote, so the town installs a stoplight. 
C)  4-way stop wins the first vote and 4-way stop wins the second vote, so the town installs a 4-way stop. 
D)  4-way stop wins the first vote and stoplight wins the second vote, so the town installs a stoplight.

Question 11

Political leaders are always aiming for an optimal combination of efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 12

Table 22-6
  
-Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: A,B,and C.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is true?

Accepted Answer

A)  As the Condorcet Paradox predicts, majority rule fails to produce transitive preferences for society. 
B)  As Arrow's Impossibility Theorem demonstrates, it is impossible from this information to determine which outcome the voters prefer. 
C)  The median voter theorem allows us to conclude that in a vote between B and C, B will win since the Type 2 voter is the median voter. 
D)  While the Condorcet Paradox predicts that majority rule may not produce transitive preferences for society as a whole, society's preferences in this case are transitive. 
A)  As the Condorcet Paradox predicts, majority rule fails to produce transitive preferences for society. 
B)  As Arrow's Impossibility Theorem demonstrates, it is impossible from this information to determine which outcome the voters prefer. 
C)  The median voter theorem allows us to conclude that in a vote between B and C, B will win since the Type 2 voter is the median voter. 
D)  While the Condorcet Paradox predicts that majority rule may not produce transitive preferences for society as a whole, society's preferences in this case are transitive.

Question 13

Table 22-3
The citizens of Anytown will decide whether to build a new library, a new community center, or a new ice rink. 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 22-3.If (1)the first vote pits "library" against "ice rink," and (2)the second vote pits "community center" against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A)  "Library" wins the first vote and "library" wins the second vote, so they build a library. 
B)  "Library" wins the first vote and "community center" wins the second vote, so they build a community center. 
C)  "Ice rink" wins the first vote and "ice rink" wins the second vote, so they build an ice rink. 
D)  "Ice rink" wins the first vote and "community center" wins the second vote, so they build a community center. 
A)  "Library" wins the first vote and "library" wins the second vote, so they build a library. 
B)  "Library" wins the first vote and "community center" wins the second vote, so they build a community center. 
C)  "Ice rink" wins the first vote and "ice rink" wins the second vote, so they build an ice rink. 
D)  "Ice rink" wins the first vote and "community center" wins the second vote, so they build a community center.

Question 14

When homeowners sell a house,part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house.The purpose of the statement of disclosure is to try to solve the

Accepted Answer

A)  principal-agent problem. 
B)  moral-hazard problem. 
C)  adverse-selection problem. 
D)  signaling problem. 
A)  principal-agent problem. 
B)  moral-hazard problem. 
C)  adverse-selection problem. 
D)  signaling problem.

Question 15

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow defined a "perfect" voting system.That system includes which of the following features?

Accepted Answer

A)  unanimity 
B)  transitivity 
C)  absence of a dictator 
D)  All of the above are correct. 
A)  unanimity 
B)  transitivity 
C)  absence of a dictator 
D)  All of the above are correct.

Question 16

Frequently it is the case that: (1)A worker knows more than his employer about how much effort he puts into his job,and (2)the seller of a used car knows more than the buyer about the car's condition.

Accepted Answer

A)  Neither (1) nor (2) serves as an example of asymmetric information. 
B)  Both (1) and (2) serve as examples of asymmetric information. 
C)  Neither (1) nor (2) serves as an example of a hidden action. 
D)  Both (1) and (2) serve as examples of hidden action. 
A)  Neither (1) nor (2) serves as an example of asymmetric information. 
B)  Both (1) and (2) serve as examples of asymmetric information. 
C)  Neither (1) nor (2) serves as an example of a hidden action. 
D)  Both (1) and (2) serve as examples of hidden action.

Question 17

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

Accepted Answer

A)  The employer pays his workers wages that are unusually high for the industry and region. 
B)  The employer has voluntarily removed video cameras from the factory floor. 
C)  The employer has discontinued the practice of giving his employees' year-end bonuses. 
D)  Both A and B are correct. 
A)  The employer pays his workers wages that are unusually high for the industry and region. 
B)  The employer has voluntarily removed video cameras from the factory floor. 
C)  The employer has discontinued the practice of giving his employees' year-end bonuses. 
D)  Both A and B are correct.

Question 19

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Accepted Answer

A)  physics. 
B)  biology. 
C)  psychology. 
D)  anthropology. 
A)  physics. 
B)  biology. 
C)  psychology. 
D)  anthropology.

Question 20

Some of the systematic mistakes that people make include

Accepted Answer

A)  being overconfident. 
B)  placing too much weight on events that are more vivid compared to those with greater statistical probability. 
C)  being generally unwilling to change their minds. 
D)  All of the above are correct. 
A)  being overconfident. 
B)  placing too much weight on events that are more vivid compared to those with greater statistical probability. 
C)  being generally unwilling to change their minds. 
D)  All of the above are correct.

Studies of human decision-making have detected systematic mistakes that people make.Which of the following have been detected?

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night,it is an example of

A person who makes decisions that are "merely good enough" is called a(n)

Which of the following sets of preferences satisfies the property of transitivity?

If you are assigned the role of Player A in the Ultimatum game and you propose that player B gets $1 and you get $99

Economists use basic psychological insights in the field of study called

Government action in cases of asymmetric information may not be an ideal solution because

Political leaders are always aiming for an optimal combination of efficiency and equality.

Table 22-6 -Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: A,B,and C.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is true?

When homeowners sell a house,part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house.The purpose of the statement of disclosure is to try to solve the

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow defined a "perfect" voting system.That system includes which of the following features?

Frequently it is the case that: (1)A worker knows more than his employer about how much effort he puts into his job,and (2)the seller of a used car knows more than the buyer about the car's condition.

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Some of the systematic mistakes that people make include

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.

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.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Filters

Exam 22: Frontiers in Microeconomics.

Studies of human decision-making have detected systematic mistakes that people make.Which of the following have been detected?

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night,it is an example of

A person who makes decisions that are "merely good enough" is called a(n)

Which of the following sets of preferences satisfies the property of transitivity?

If you are assigned the role of Player A in the Ultimatum game and you propose that player B gets $1 and you get $99

Economists use basic psychological insights in the field of study called

Government action in cases of asymmetric information may not be an ideal solution because

Political leaders are always aiming for an optimal combination of efficiency and equality.

Table 22-6 -Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: A,B,and C.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is true?

When homeowners sell a house,part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house.The purpose of the statement of disclosure is to try to solve the

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow defined a "perfect" voting system.That system includes which of the following features?

Frequently it is the case that: (1)A worker knows more than his employer about how much effort he puts into his job,and (2)the seller of a used car knows more than the buyer about the car's condition.

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Some of the systematic mistakes that people make include

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.

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.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Filters