Question 1

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 2

The median-voter theorem explains why

Accepted Answer

A) politicians take extreme stands on issues. 
B) voters are attracted to political outsiders. 
C) two opposing politicians tend to take opposite sides of each issues. 
D) politicians tend to take middle-of-the-road positions. 
A) politicians take extreme stands on issues. 
B) voters are attracted to political outsiders. 
C) two opposing politicians tend to take opposite sides of each issues. 
D) politicians tend to take middle-of-the-road positions.

Question 3

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.Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting by Sam,Diane,and Cliff?

Accepted Answer

A) The paradox implies that pairwise voting never produces transitive preferences, and so the voting by Sam, Diane, and Cliff fails to produce transitive preferences. 
B) The paradox implies that pairwise voting sometimes (but not always) produces transitive preferences, and the voting by Sam, Diane, and Cliff does produce transitive preferences. 
C) The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting by Sam, Diane, and Cliff fails to produce transitive preferences. 
D) The paradox does not apply to the case at hand, because Diane's preferences are not individually transitive. 
A) The paradox implies that pairwise voting never produces transitive preferences, and so the voting by Sam, Diane, and Cliff fails to produce transitive preferences. 
B) The paradox implies that pairwise voting sometimes (but not always) produces transitive preferences, and the voting by Sam, Diane, and Cliff does produce transitive preferences. 
C) The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting by Sam, Diane, and Cliff fails to produce transitive preferences. 
D) The paradox does not apply to the case at hand, because Diane's preferences are not individually transitive.

Question 4

In economics,a difference in access to relevant knowledge is called a(n)

Accepted Answer

A) behavioral gap. 
B) frontier gap. 
C) information asymmetry. 
D) access imperfection. 
A) behavioral gap. 
B) frontier gap. 
C) information asymmetry. 
D) access imperfection.

Question 5

Which of the following statements is correct?

Accepted Answer

A) The moral-hazard problem is a problem involving hidden actions. 
B) Adverse selection is a problem involving hidden actions. 
C) Adverse selection is a problem involving principals and agents. 
D) Moral hazard always involves asymmetric information; asymmetric information always involves adverse selection. 
A) The moral-hazard problem is a problem involving hidden actions. 
B) Adverse selection is a problem involving hidden actions. 
C) Adverse selection is a problem involving principals and agents. 
D) Moral hazard always involves asymmetric information; asymmetric information always involves adverse selection.

Question 6

In the employer-worker relationship,the employer is regarded as the "principal" and the worker is regarded as the "agent."

Accepted Answer

A) True 
 B)False

Question 7

The suggestion that people are "satisficers" is similar to the view that people

Accepted Answer

A) are wealth-maximizers. 
B) exhibit "bounded rationality." 
C) go to a lot of trouble to weigh costs and benefits before choosing a course of action. 
D) change their minds often. 
A) are wealth-maximizers. 
B) exhibit "bounded rationality." 
C) go to a lot of trouble to weigh costs and benefits before choosing a course of action. 
D) change their minds often.

Question 8

Explain the Condorcet paradox.To which type of voting system does it apply?

Accepted Answer

The Condorcet paradox applies directly t

Question 9

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Accepted Answer

A) The firm cares less about profit and more about cost when there are many competitors in the market. 
B) The firm offers an employee-incentive program in which employees share in the firm's profits.. 
C) The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm. 
D) The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks. 
A) The firm cares less about profit and more about cost when there are many competitors in the market. 
B) The firm offers an employee-incentive program in which employees share in the firm's profits.. 
C) The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm. 
D) The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.

Question 10

Hernando travels a great deal,and over the past several years he has read dozens of reviews of hotel chains,all of which rave about the clean rooms and great service at Vacation Inn hotels.Last month,Hernando checked into a room at a Vacation Inn for the first time,only to find the room filthy and the service lousy.He decided the Vacation Inn chain is inferior to other hotel chains.

Accepted Answer

A) Hernando was irrational to have believed the reviews that he had read. 
B) Hernando was rational to have changed his mind about Vacation Inns based on his one experience. 
C) Hernando is an example of someone who gives too much weight to a small number of vivid observations. 
D) Hernando is an example of someone who behaves in the homo economicus fashion. 
A) Hernando was irrational to have believed the reviews that he had read. 
B) Hernando was rational to have changed his mind about Vacation Inns based on his one experience. 
C) Hernando is an example of someone who gives too much weight to a small number of vivid observations. 
D) Hernando is an example of someone who behaves in the homo economicus fashion.

Question 11

Which of the following is an example of satisficing behavior?

Accepted Answer

A) You continue studying for your economics exam until you believe you'll get a perfect score. 
B) You spend time looking over the lettuce at the grocery store in order to make sure you get the best head of lettuce. 
C) You briefly clean your room because that's all it takes to get it "clean enough." 
D) You carefully plan your day in order to get "the most out of life." 
A) You continue studying for your economics exam until you believe you'll get a perfect score. 
B) You spend time looking over the lettuce at the grocery store in order to make sure you get the best head of lettuce. 
C) You briefly clean your room because that's all it takes to get it "clean enough." 
D) You carefully plan your day in order to get "the most out of life."

Question 12

Which of the following statements is correct?

Accepted Answer

A) Hidden actions and hidden characteristics are both associated with the moral-hazard problem. 
B) Hidden actions and hidden characteristics are both associated with the adverse-selection problem. 
C) Hidden actions are associated with the moral-hazard problem, whereas hidden characteristics are associated with the adverse-selection problem. 
D) Hidden actions are associated with the adverse-selection problem, whereas hidden characteristics are associated with the moral-hazard problem. 
A) Hidden actions and hidden characteristics are both associated with the moral-hazard problem. 
B) Hidden actions and hidden characteristics are both associated with the adverse-selection problem. 
C) Hidden actions are associated with the moral-hazard problem, whereas hidden characteristics are associated with the adverse-selection problem. 
D) Hidden actions are associated with the adverse-selection problem, whereas hidden characteristics are associated with the moral-hazard problem.

Question 13

As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.This voting method is called a(n)

Accepted Answer

A) median vote. 
B) pairwise minority vote. 
C) Borda count. 
D) Arrow count. 
A) median vote. 
B) pairwise minority vote. 
C) Borda count. 
D) Arrow count.

Question 14

Asymmetric information

Accepted Answer

A) is rare in economic transactions. 
B) can take the form of a hidden action or a hidden characteristic. 
C) is the underlying problem with the Condorcet Paradox. 
D) Both B and C are correct. 
A) is rare in economic transactions. 
B) can take the form of a hidden action or a hidden characteristic. 
C) is the underlying problem with the Condorcet Paradox. 
D) Both B and C are correct.

Question 15

Insurance companies charge annual premiums to collect revenue,which they then use to pay customers who file claims for damages they incur.As a result of the moral hazard problem (1)what is the percentage of policy holders making claims,and (2)what is the average premium charged when compared to a world with no moral hazard problem?

Accepted Answer

A) The percentage of policy holders making claims is higher; average annual premiums are lower. 
B) The percentage of policy holders making claims is lower; average annual premiums are lower. 
C) The percentage of policy holders making claims is higher; average annual premiums are higher. 
D) The percentage of policy holders making claims is lower; average annual premiums are higher. 
A) The percentage of policy holders making claims is higher; average annual premiums are lower. 
B) The percentage of policy holders making claims is lower; average annual premiums are lower. 
C) The percentage of policy holders making claims is higher; average annual premiums are higher. 
D) The percentage of policy holders making claims is lower; average annual premiums are higher.

Question 16

Joe's Computers builds and sells computers for the local retail market.Since Joe's business does not have the name recognition of some of the bigger computer retailers,Joe advertises a "One-Year Money Back Guarantee" to indicate to buyers that his product is of high quality.This guarantee is an example of

Accepted Answer

A) screening. 
B) signaling. 
C) the seller's curse. 
D) the principal-agent problem. 
A) screening. 
B) signaling. 
C) the seller's curse. 
D) the principal-agent problem.

Question 17

The "lemons" problem is a likely explanation for the fact that

Accepted Answer

A) for several months after it is new, the price of a car falls very little. 
B) almost no one favors government-provided health insurance. 
C) people in average health may be discouraged from buying health insurance by the high price. 
D) employers are reluctant to monitor the activities of their workers, fearing that some of the workers may take legal action against the employers. 
A) for several months after it is new, the price of a car falls very little. 
B) almost no one favors government-provided health insurance. 
C) people in average health may be discouraged from buying health insurance by the high price. 
D) employers are reluctant to monitor the activities of their workers, fearing that some of the workers may take legal action against the employers.

Question 18

Scenario 22-4
Consider the following voting rules:
   
Assume the following voter preferences for a voting district:
  
-Refer to Scenario 22-4.Which candidate wins under pairwise majority voting if first Brown is put up against Jones,then the winner takes on Smith,and finally the winner of that election takes on Thomas?

Accepted Answer

A) Brown 
B) Jones 
C) Smith 
D) Thomas 
A) Brown 
B) Jones 
C) Smith 
D) Thomas

Question 19

Under majority rule,the order in which items are voted on is

Accepted Answer

A) unimportant, and this is a lesson of the Condorcet paradox. 
B) unimportant, and this has nothing to do with the Condorcet paradox. 
C) important, and this is a lesson of the Condorcet paradox. 
D) important, and this has nothing to do with the Condorcet paradox. 
A) unimportant, and this is a lesson of the Condorcet paradox. 
B) unimportant, and this has nothing to do with the Condorcet paradox. 
C) important, and this is a lesson of the Condorcet paradox. 
D) important, and this has nothing to do with the Condorcet paradox.

Question 20

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums.This practice is best described as an example of

Accepted Answer

A) screening. 
B) behavioral economics. 
C) the Condorcet Paradox. 
D) signaling. 
A) screening. 
B) behavioral economics. 
C) the Condorcet Paradox. 
D) signaling.

Exam 22: Frontiers of Microeconomics

The median voter

The median-voter theorem explains why

In economics,a difference in access to relevant knowledge is called a(n)

Which of the following statements is correct?

In the employer-worker relationship,the employer is regarded as the "principal" and the worker is regarded as the "agent."

The suggestion that people are "satisficers" is similar to the view that people

Explain the Condorcet paradox.To which type of voting system does it apply?

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Which of the following is an example of satisficing behavior?

Which of the following statements is correct?

As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.This voting method is called a(n)

Asymmetric information

The "lemons" problem is a likely explanation for the fact that

Under majority rule,the order in which items are voted on is

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums.This practice is best described as an example of

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

Filters