Question 1

Recent developments in political economy

Accepted Answer

A)  render much of the traditional field of political science obsolete. 
B)  render much of the traditional field of economics obsolete. 
C)  illustrate the resolute nature of democracy. 
D)  point to the fact that government is a less-than-perfect institution. 
A)  render much of the traditional field of political science obsolete. 
B)  render much of the traditional field of economics obsolete. 
C)  illustrate the resolute nature of democracy. 
D)  point to the fact that government is a less-than-perfect institution.

Question 2

The results of the ultimatum game illustrate the fact that

Accepted Answer

A)  people's behavior is often driven by an innate sense of fairness. 
B)  homo economicus is a good description of people's behavior. 
C)  self-interest brings out the most efficient economic outcome. 
D)  Both b and c are correct. 
A)  people's behavior is often driven by an innate sense of fairness. 
B)  homo economicus is a good description of people's behavior. 
C)  self-interest brings out the most efficient economic outcome. 
D)  Both b and c are correct.

Question 3

Because people with hidden health problems are more likely to buy health insurance than are other people,

Accepted Answer

A)  the price of health insurance reflects the costs of a sicker-than-average person. 
B)  the price of health insurance is too low, relative to the socially-optimal price. 
C)  people in average health may be encouraged to buy too much health insurance, relative to the socially-optimal quantity. 
D)  the Condorcet Paradox suggests that people who are sicker than average will ultimately buy more health insurance. 
A)  the price of health insurance reflects the costs of a sicker-than-average person. 
B)  the price of health insurance is too low, relative to the socially-optimal price. 
C)  people in average health may be encouraged to buy too much health insurance, relative to the socially-optimal quantity. 
D)  the Condorcet Paradox suggests that people who are sicker than average will ultimately buy more health insurance.

Question 4

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

Question 5

Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

Accepted Answer

Drivers (buyers and potential buyers of

Question 6

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.If the voting method is a Borda count,which alternative will be chosen?

Accepted Answer

A)  Comedy 
B)  Action 
C)  Horror 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance. 
A)  Comedy 
B)  Action 
C)  Horror 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance.

Question 7

Based on the studies of human decision making,which of the following statements is correct?

Accepted Answer

A)  Most people are not bothered by perceived unfairness as long as they receive some compensation, even if the amount is very small. 
B)  Most people are very willing to change their minds. 
C)  Many people's preferences are inconsistent over time. 
D)  All of the above are correct. 
A)  Most people are not bothered by perceived unfairness as long as they receive some compensation, even if the amount is very small. 
B)  Most people are very willing to change their minds. 
C)  Many people's preferences are inconsistent over time. 
D)  All of the above are correct.

Question 8

Arrow's impossibility theorem is "disturbing" in the sense that it proves that

Accepted Answer

A)  no voting system is perfect. 
B)  only a dictator can produce a desirable social outcome. 
C)  the preferences of the wealthy should be given more weight than the preferences of the poor. 
D)  the centuries-old Condorcet paradox was not a paradox after all. 
A)  no voting system is perfect. 
B)  only a dictator can produce a desirable social outcome. 
C)  the preferences of the wealthy should be given more weight than the preferences of the poor. 
D)  the centuries-old Condorcet paradox was not a paradox after all.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is an example of asymmetric information?

Accepted Answer

A)  When someone is applying for a job, the employer checks references to determine the previous work habits of the applicant. 
B)  When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C)  When someone is considering buying a used car from a dealership, the potential buyer requests documentation of the repair history of the car. 
D)  All of the above are correct. 
A)  When someone is applying for a job, the employer checks references to determine the previous work habits of the applicant. 
B)  When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C)  When someone is considering buying a used car from a dealership, the potential buyer requests documentation of the repair history of the car. 
D)  All of the above are correct.

Question 11

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

Accepted Answer

A)  unanimity and transitivity only 
B)  transitivity and independence of irrelevant alternatives only 
C)  no dictators and transitivity only 
D)  unanimity, transitivity, independence of irrelevant alternatives, and no dictators 
A)  unanimity and transitivity only 
B)  transitivity and independence of irrelevant alternatives only 
C)  no dictators and transitivity only 
D)  unanimity, transitivity, independence of irrelevant alternatives, and no dictators

Question 12

The Condorcet voting paradox shows that outcomes based on dictatorial preferences do not always obey the property of transitivity.

Accepted Answer

A) True 
 B)False

Question 13

Bob is planning to sell his home.In preparation for the sale,he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem.This is an example of

Accepted Answer

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

Question 14

When economists assume that people are rational,they assume that

Accepted Answer

A)  consumers maximize profits. 
B)  firms maximize revenues. 
C)  consumers maximize utility. 
D)  firms maximize output. 
A)  consumers maximize profits. 
B)  firms maximize revenues. 
C)  consumers maximize utility. 
D)  firms maximize output.

Question 15

Studies of human decision making have found that people are reluctant to change their minds.

Accepted Answer

A) True 
 B)False

Question 16

The median voter

Accepted Answer

A)  is the voter exactly in the middle of the distribution. 
B)  is the voter whose preferred outcome beats any other proposal in a two-way race. 
C)  always has more than half the votes on his side in a two-way race. 
D)  All of the above are correct. 
A)  is the voter exactly in the middle of the distribution. 
B)  is the voter whose preferred outcome beats any other proposal in a two-way race. 
C)  always has more than half the votes on his side in a two-way race. 
D)  All of the above are correct.

Question 17

A "satisficer" is a person who

Accepted Answer

A)  always chooses the best course of action. 
B)  often chooses the worst course of action. 
C)  makes decisions that are merely good enough. 
D)  studies both economics and psychology. 
A)  always chooses the best course of action. 
B)  often chooses the worst course of action. 
C)  makes decisions that are merely good enough. 
D)  studies both economics and psychology.

Question 18

Table 22-5
The 500 voters of Appleton are deciding by majority rule how much to spend on a new library.
  
-Refer to Table 22-5.The median voter prefers to spend

Accepted Answer

A)  $2 million. 
B)  $2.57 million. 
C)  $3 million. 
D)  $4 million. 
A)  $2 million. 
B)  $2.57 million. 
C)  $3 million. 
D)  $4 million.

Question 19

Evidence from studies of workers' choices on whether to participate in 401(k)plans suggests that the workers' behavior appears to exhibit

Accepted Answer

A)  indifference. 
B)  ignorance. 
C)  inertia. 
D)  indecision. 
A)  indifference. 
B)  ignorance. 
C)  inertia. 
D)  indecision.

Question 20

Table 22-4
Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
  
-Refer to Table 22-4.If the vote were conducted according to a Borda count system where each person's first choice receives 4 points,second choice 3 points,third choice 2 points and fourth choice 1 point,the result would be

Accepted Answer

A)  that A would win. 
B)  that B would win. 
C)  that C would win. 
D)  a tie between A and D. 
A)  that A would win. 
B)  that B would win. 
C)  that C would win. 
D)  a tie between A and D.

Recent developments in political economy

The results of the ultimatum game illustrate the fact that

Because people with hidden health problems are more likely to buy health insurance than are other people,

Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

Based on the studies of human decision making,which of the following statements is correct?

Arrow's impossibility theorem is "disturbing" in the sense that it proves that

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

Which of the following is an example of asymmetric information?

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

The Condorcet voting paradox shows that outcomes based on dictatorial preferences do not always obey the property of transitivity.

Bob is planning to sell his home.In preparation for the sale,he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem.This is an example of

When economists assume that people are rational,they assume that

Studies of human decision making have found that people are reluctant to change their minds.

The median voter

A "satisficer" is a person who

Table 22-5 The 500 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-5.The median voter prefers to spend

Evidence from studies of workers' choices on whether to participate in 401(k)plans suggests that the workers' behavior appears to exhibit

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.

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Exam 22: Frontiers in Microeconomics.

Recent developments in political economy

The results of the ultimatum game illustrate the fact that

Because people with hidden health problems are more likely to buy health insurance than are other people,

Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

Based on the studies of human decision making,which of the following statements is correct?

Arrow's impossibility theorem is "disturbing" in the sense that it proves that

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

Which of the following is an example of asymmetric information?

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

The Condorcet voting paradox shows that outcomes based on dictatorial preferences do not always obey the property of transitivity.

Bob is planning to sell his home.In preparation for the sale,he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem.This is an example of

When economists assume that people are rational,they assume that

Studies of human decision making have found that people are reluctant to change their minds.

The median voter

A "satisficer" is a person who

Table 22-5 The 500 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-5.The median voter prefers to spend

Evidence from studies of workers' choices on whether to participate in 401(k)plans suggests that the workers' behavior appears to exhibit

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