Question 1

The Condorcet paradox shows that

Accepted Answer

A) allocations of resources based on majority rule are always inefficient. 
B) problems in counting votes can negate legitimate democratic outcomes. 
C) the order on which things are voted can affect the result. 
D) transitive preferences are inconsistent with rationality. 
A) allocations of resources based on majority rule are always inefficient. 
B) problems in counting votes can negate legitimate democratic outcomes. 
C) the order on which things are voted can affect the result. 
D) transitive preferences are inconsistent with rationality.

Question 2

Table 22-5
  
-Refer to Table 22-5.The table shows the preferences of four types of voters over four possible outcomes: W,X,Y,and Z.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is false?

Accepted Answer

A) Outcome W is preferred to outcome X overall. 
B) Outcome X is preferred to outcome Y overall. 
C) Outcome Y is preferred to outcome W overall. 
D) Outcome W is preferred to outcome Z overall. 
A) Outcome W is preferred to outcome X overall. 
B) Outcome X is preferred to outcome Y overall. 
C) Outcome Y is preferred to outcome W overall. 
D) Outcome W is preferred to outcome Z overall.

Question 3

"Signaling" refers to actions by an informed party for the sole purpose of

Accepted Answer

A) telling another party that the signaler has information to reveal, without actually revealing that information. 
B) conveying false information. 
C) confusing another party. 
D) credibly revealing private information. 
A) telling another party that the signaler has information to reveal, without actually revealing that information. 
B) conveying false information. 
C) confusing another party. 
D) credibly revealing private information.

Question 4

Evidence from experiments in which real people play the ultimatum game supports the idea that people

Accepted Answer

A) are rational wealth-maximizers. 
B) tend to be driven by fairness, without regard for their own self-interest. 
C) are driven by both fairness and self-interest. 
D) have trouble calculating their own levels of wealth. 
A) are rational wealth-maximizers. 
B) tend to be driven by fairness, without regard for their own self-interest. 
C) are driven by both fairness and self-interest. 
D) have trouble calculating their own levels of wealth.

Question 5

The problem that arises when one person performs a task on behalf of another person is called

Accepted Answer

A) the hidden characteristics problem. 
B) the lemons problem. 
C) moral hazard. 
D) adverse selection. 
A) the hidden characteristics problem. 
B) the lemons problem. 
C) moral hazard. 
D) adverse selection.

Question 6

The classic example of adverse selection is the

Accepted Answer

A) market for used cars. 
B) market for new houses. 
C) relationship between husband and wife. 
D) relationship between a worker and his employer. 
A) market for used cars. 
B) market for new houses. 
C) relationship between husband and wife. 
D) relationship between a worker and his employer.

Question 7

Table 22-6
  
-Refer to Table 22-6.The table shows the preferences of 100 voters over three possible outcomes: X,Y,and Z.If a Borda count election were held among these voters,giving three points to each voter's first choice,two points to the second choice,and one point to the last choice,which outcome would win the election?

Accepted Answer

A) Outcome X 
B) Outcome Y 
C) Outcome Z 
D) Either outcome X or outcome Z since these have the same total score. 
A) Outcome X 
B) Outcome Y 
C) Outcome Z 
D) Either outcome X or outcome Z since these have the same total score.

Question 8

Which of the following would violate transitivity?

Accepted Answer

A) John likes A more than B, C more than B, and C more than a. 
B) Steve likes C more than B, A more than B, B more than D, and C more than D. 
C) Sarah likes C more than A, B more than D, A more than B, and D more than C. 
D) Mitch likes C more than B, C more than D, and B more than D. 
A) John likes A more than B, C more than B, and C more than a. 
B) Steve likes C more than B, A more than B, B more than D, and C more than D. 
C) Sarah likes C more than A, B more than D, A more than B, and D more than C. 
D) Mitch likes C more than B, C more than D, and B more than D.

Question 9

Which of the following is an example of a principal-agent relationship?

Accepted Answer

A) Car dealer and potential customer 
B) Business consultant and client 
C) Retail store manager and potential customer 
D) Both A and C are correct. 
A) Car dealer and potential customer 
B) Business consultant and client 
C) Retail store manager and potential customer 
D) Both A and C are correct.

Question 10

The principal-agent problem is more serious in large firms than in small firms because

Accepted Answer

A) monitoring employee activity in large firms is generally more difficult. 
B) employees in large firms have less information. 
C) profits increase with the size of the firm. 
D) customers expect better treatment from small firms and they usually get it. 
A) monitoring employee activity in large firms is generally more difficult. 
B) employees in large firms have less information. 
C) profits increase with the size of the firm. 
D) customers expect better treatment from small firms and they usually get it.

Question 11

The tendency of many people to procrastinate supports the view that people are consistent over time.

Accepted Answer

A) True 
 B)False

Question 12

When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Accepted Answer

A) adverse selection. 
B) a Condorcet paradox. 
C) a screening problem. 
D) moral hazard. 
A) adverse selection. 
B) a Condorcet paradox. 
C) a screening problem. 
D) moral hazard.

Question 13

Majority rule will produce the outcome most preferred by the median voter.

Accepted Answer

A) True 
 B)False

Question 14

Students of microeconomic principles often say they are going to study "tonight," because the only way to pass the exam is to study some every night.When "tonight" comes,some students choose to do something else.Come exam-day,these students do not do well on their exam.This observation is an example of how people

Accepted Answer

A) are inconsistent over time. 
B) are consistent over time. 
C) are mainly interested in fairness. 
D) are rational. 
A) are inconsistent over time. 
B) are consistent over time. 
C) are mainly interested in fairness. 
D) are rational.

Question 15

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Accepted Answer

A) True 
 B)False

Question 16

The Arrow impossibility theorem shows that

Accepted Answer

A) democracy should be abandoned as a form of government. 
B) it is impossible to improve upon democratic voting methods as a mechanism for social choice. 
C) all voting systems are flawed as a mechanism for social choice. 
D) the median voter's preferences will always win in a two-way vote. 
A) democracy should be abandoned as a form of government. 
B) it is impossible to improve upon democratic voting methods as a mechanism for social choice. 
C) all voting systems are flawed as a mechanism for social choice. 
D) the median voter's preferences will always win in a two-way vote.

Question 17

Insurance companies charge annual premiums to collect revenue,which they then use to pay customers who file claims for damages they incur.Because of the moral hazard problem insurance companies separate customers into groups.Group 1: customers who file few claims & Group 2: customers that file a lot of claims.After creating these groups,what happens to the average annual premium within a group?

Accepted Answer

A) Group 1: average annual premium increases
Group 2: average annual premium increases 
B) Group 1: average annual premium decreases
Group 2: average annual premium increases 
C) Group 1: average annual premium increases
Group 2: average annual premium decreases 
D) Group 1: average annual premium decreases
Group 2: average annual premium decreases 
A) Group 1: average annual premium increases
Group 2: average annual premium increases 
B) Group 1: average annual premium decreases
Group 2: average annual premium increases 
C) Group 1: average annual premium increases
Group 2: average annual premium decreases 
D) Group 1: average annual premium decreases
Group 2: average annual premium decreases

Question 18

Table 22-5
  
-Refer to Table 22-5.The table shows the preferences of four types of voters over four possible outcomes: W,X,Y,and Z.In addition,the table shows the percentage of voters of each type.Suppose a Borda count election is held in which each voter ranks the four outcomes,giving 1 point to last place,2 points to second to last,3 points to the second best,and 4 points to the best.In this case,which outcome would win?

Accepted Answer

A) W 
B) X 
C) Y 
D) Z 
A) W 
B) X 
C) Y 
D) Z

Question 19

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 20

Scenario 22-5
Three candidates, Fred, Barb, and William, are running for office. There are three voters in the upcoming election: Heather, Don, and Luanne. Heather prefers Barb over Fred and Fred over William. Don prefers William over Barb and Barb over Fred. Luanne prefers Fred over Barb and Barb over William.
-Refer to Scenario 22-5.If the voters were given a choice of Fred versus Barb first,then the winner was in a second election versus William,who would win?

Accepted Answer

A) Fred 
B) Barb 
C) William 
D) There is not enough information to answer this question. 
A) Fred 
B) Barb 
C) William 
D) There is not enough information to answer this question.

Exam 22: Frontiers of Microeconomics

The Condorcet paradox shows that

Table 22-5 -Refer to Table 22-5.The table shows the preferences of four types of voters over four possible outcomes: W,X,Y,and Z.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is false?

"Signaling" refers to actions by an informed party for the sole purpose of

Evidence from experiments in which real people play the ultimatum game supports the idea that people

The problem that arises when one person performs a task on behalf of another person is called

The classic example of adverse selection is the

Which of the following would violate transitivity?

Which of the following is an example of a principal-agent relationship?

The principal-agent problem is more serious in large firms than in small firms because

The tendency of many people to procrastinate supports the view that people are consistent over time.

When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Majority rule will produce the outcome most preferred by the median voter.

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

The Arrow impossibility theorem shows that

When economists assume that people are rational,they assume that

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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