Question 1

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

Accepted Answer

A) Arrow impossibility theorem. 
B) Condorcet paradox. 
C) pairwise voting proposition. 
D) median voter theorem. 
A) Arrow impossibility theorem. 
B) Condorcet paradox. 
C) pairwise voting proposition. 
D) median voter theorem.

Question 2

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 3

Scenario 22-1
At issue in a particular city vote is how much to spend, per person, on city parks next year. Among the 10,000 voters, 1,000 prefer to spend $30 per person, but no more; 3,500 prefer to spend $45 per person, but no more; 2,500 prefer to spend $80 per person, but no more; and 3,000 prefer to spend $150 per person, but no more.
-Refer to Scenario 22-1.The median voter is one who prefers to spend

Accepted Answer

A) $30. 
B) $45. 
C) $80. 
D) $150. 
A) $30. 
B) $45. 
C) $80. 
D) $150.

Question 4

Scenario 22-2
Five voters must choose from among four options: W, X, Y, or Z. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
  
-Refer to Scenario 22-2.Which pairwise voting scheme would result in outcome Y?

Accepted Answer

A) First, choose between W and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and Z. 
B) First, choose between Z and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and W. 
C) First, choose between X and Y.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and W. 
D) First, choose between X and W.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and Y. 
A) First, choose between W and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and Z. 
B) First, choose between Z and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and W. 
C) First, choose between X and Y.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and W. 
D) First, choose between X and W.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and Y.

Question 5

Scenario 22-3
The following table shows the preferences for the five voters in a city regarding how to deal with the city's diseased trees.
   
A = do nothing
B = Follow the expert's advice to remove every tree
C = remove every 4th tree now and perhaps more later
D = use an untested spraying alternative
-Refer to Scenario 22-3.Consider the public policy for dealing with the diseased trees.According to plurality rule - the policy that the most people rank first - which policy wins?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 6

When each voter has a most-preferred outcome for the expenditure on a particular government program,majority rule will produce the outcome

Accepted Answer

A) preferred by the mean (average) voter. 
B) preferred by the median voter. 
C) that causes the political party in power to increase its power. 
D) defined by Arrow's Impossibility Theorem. 
A) preferred by the mean (average) voter. 
B) preferred by the median voter. 
C) that causes the political party in power to increase its power. 
D) defined by Arrow's Impossibility Theorem.

Question 7

The field of political economy

Accepted Answer

A) casts aside most of the standard methods of economic analysis. 
B) is also referred to as the field of public choice. 
C) is also referred to as the field of macroeconomics. 
D) produces the conclusion that democratic principles rarely lead to desirable economic outcomes. 
A) casts aside most of the standard methods of economic analysis. 
B) is also referred to as the field of public choice. 
C) is also referred to as the field of macroeconomics. 
D) produces the conclusion that democratic principles rarely lead to desirable economic outcomes.

Question 8

Table 22-3
  
-Refer to Table 22-3. The table shows the preferences of three types of voters over three possible outcomes: X,Y,and Z.The table also shows the percentage of voters of each type.Based on this information,which voter type is the median voter?

Accepted Answer

A) Type 1 
B) Type 2 
C) Type 3 
D) The median voter cannot be determined without knowing the pair of outcomes from which the voters will be choosing. 
A) Type 1 
B) Type 2 
C) Type 3 
D) The median voter cannot be determined without knowing the pair of outcomes from which the voters will be choosing.

Question 9

Which of the following is an example of signaling?

Accepted Answer

A) John is considering the purchase of a used car.Before making the purchase he has the car checked by an auto mechanic. 
B) Steve is applying for a new life insurance policy.Before writing the policy, the insurance company requires Steve to be examined by a doctor. 
C) Traci is applying for a new job.Before hiring her, the firm requires Traci to take a drug test. 
D) Ray is planning to ask for Honna's hand in marriage.Before asking her, he buys her a box of her favorite chocolates and takes her to dinner at her favorite restaurant. 
A) John is considering the purchase of a used car.Before making the purchase he has the car checked by an auto mechanic. 
B) Steve is applying for a new life insurance policy.Before writing the policy, the insurance company requires Steve to be examined by a doctor. 
C) Traci is applying for a new job.Before hiring her, the firm requires Traci to take a drug test. 
D) Ray is planning to ask for Honna's hand in marriage.Before asking her, he buys her a box of her favorite chocolates and takes her to dinner at her favorite restaurant.

Question 10

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 11

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget.Which of the following statements is true?

Accepted Answer

A) The Condorcet Paradox predicts that the $100 budget will win even though fewer people prefer that budget. 
B) The median voter theorem predicts that the winning budget will be $125, the median of the preferences of the two types of voters. 
C) Arrow's impossibility theorem says that the winning budget cannot be determined in this election since there is no unanimity. 
D) None of the above. 
A) The Condorcet Paradox predicts that the $100 budget will win even though fewer people prefer that budget. 
B) The median voter theorem predicts that the winning budget will be $125, the median of the preferences of the two types of voters. 
C) Arrow's impossibility theorem says that the winning budget cannot be determined in this election since there is no unanimity. 
D) None of the above.

Question 12

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

Accepted Answer

A) True 
 B)False

Question 13

Table 22-2
The citizens of Paradoxopolis will decide whether to build a new school, build a new park, or build a new road. 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 22-2.Which of the following statements is correct?

Accepted Answer

A) In a pairwise election, "road" beats "school." 
B) In a pairwise election, "school" beats "park." 
C) In a pairwise election, "park" beats "road." 
D) All of the above are correct. 
A) In a pairwise election, "road" beats "school." 
B) In a pairwise election, "school" beats "park." 
C) In a pairwise election, "park" beats "road." 
D) All of the above are correct.

Question 14

A comprehensive research study has revealed that a local car dealer offers the best prices on cars.Your best friend just told you that the car he purchased at the local dealer was overpriced.As a consequence,you decide to buy your car from an out-of-town dealer.This decision is an example of which of the following systematic mistakes that people make when making decisions?

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. 
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.

Question 15

Adverse selection is

Accepted Answer

A) the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior. 
B) an action taken by an uninformed party to induce an informed party to reveal information. 
C) the failure of majority voting to produce transitive preferences for society. 
D) the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party. 
A) the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior. 
B) an action taken by an uninformed party to induce an informed party to reveal information. 
C) the failure of majority voting to produce transitive preferences for society. 
D) the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.

Question 16

The field of political economy

Accepted Answer

A) applies the methods of political science to microeconomics. 
B) applies the methods of political science to macroeconomics. 
C) is relevant to the issue of how active government should be in economic matters. 
D) integrates psychological insights to better understand individual choices. 
A) applies the methods of political science to microeconomics. 
B) applies the methods of political science to macroeconomics. 
C) is relevant to the issue of how active government should be in economic matters. 
D) integrates psychological insights to better understand individual choices.

Question 17

The Borda count fails to satisfy which of Kenneth Arrow's properties of a "perfect" voting system?

Accepted Answer

A) no dictator 
B) unanimity 
C) transitivity 
D) independence of irrelevant alternatives 
A) no dictator 
B) unanimity 
C) transitivity 
D) independence of irrelevant alternatives

Question 18

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

Accepted Answer

A) True 
 B)False

Question 19

Scenario 22-2
Five voters must choose from among four options: W, X, Y, or Z. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
  
-Refer to Scenario 22-2.Which pairwise voting scheme would result in outcome W?

Accepted Answer

A) First, choose between W and X.Second, voters choose between the winner of the first vote and Y.Third, voters choose between the winner of the second vote and Z. 
B) First, choose between Z and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and W. 
C) First, choose between W and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and Z. 
D) First, choose between X and W.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and Y. 
A) First, choose between W and X.Second, voters choose between the winner of the first vote and Y.Third, voters choose between the winner of the second vote and Z. 
B) First, choose between Z and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and W. 
C) First, choose between W and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and Z. 
D) First, choose between X and W.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and Y.

Question 20

Table 22-1
Three longtime friends-Sam, Diane, and Cliff-are deciding how they will spend their Saturday evening. They all agree that they should do one of three things: go to a movie, go to a concert, or go out to dinner. They also agree that they will have two pairwise votes to determine how to spend their evening, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the table below.
  
-Refer to Table 22-1.If (1)the first vote pits "dinner" against "movie," and (2)the second vote pits "concert" against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A) "Dinner" wins the first vote and "dinner" wins the second vote, so they go to dinner. 
B) "Dinner" wins the first vote and "concert" wins the second vote, so they go to a concert. 
C) "Movie" wins the first vote and "movie" wins the second vote, so they go to a movie. 
D) "Movie" wins the first vote and "concert" wins the second vote, so they go to a concert. 
A) "Dinner" wins the first vote and "dinner" wins the second vote, so they go to dinner. 
B) "Dinner" wins the first vote and "concert" wins the second vote, so they go to a concert. 
C) "Movie" wins the first vote and "movie" wins the second vote, so they go to a movie. 
D) "Movie" wins the first vote and "concert" wins the second vote, so they go to a concert.

Exam 22: Frontiers of Microeconomics

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

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

Scenario 22-2 Five voters must choose from among four options: W, X, Y, or Z. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Scenario 22-2.Which pairwise voting scheme would result in outcome Y?

When each voter has a most-preferred outcome for the expenditure on a particular government program,majority rule will produce the outcome

The field of political economy

Table 22-3 -Refer to Table 22-3. The table shows the preferences of three types of voters over three possible outcomes: X,Y,and Z.The table also shows the percentage of voters of each type.Based on this information,which voter type is the median voter?

Which of the following is an example of signaling?

A "satisficer" is a person who

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget.Which of the following statements is true?

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

Adverse selection is

The field of political economy

The Borda count fails to satisfy which of Kenneth Arrow's properties of a "perfect" voting system?

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

Scenario 22-2 Five voters must choose from among four options: W, X, Y, or Z. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Scenario 22-2.Which pairwise voting scheme would result in outcome W?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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

Five Debates Over Macroeconomic Policy

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