Exam 22: Frontiers of Microeconomics

Each situation involves either moral hazard or adverse selection.In each case,identify whether it is a case of moral hazard or adverse selection and find the principal and agent for each situation. a.A security deposit is required for the summer cottage rental. b.A one-week-old 2014 Ford Flex is selling at a price that is 30 percent lower than the brand new one. c.A high-tech company gives stock options to their senior employees. d.A house insurance premium is lower for people who install a monitoring system in their house.

Assume Ann and Bill both love apple pie, and a pie is given to them as a gift. Both Ann and Bill can eat an entire pie themselves within a one-day period, and this pie is not edible the second day. Based on economic theory, how will they split the pie? In reality, what is the likely outcome, and why?

How have insights from the field of psychology influenced the thinking of economists in recent years

Which statement would be an implication of the median voter theorem in a race between the Conservatives and the Liberals

Condorcet explained his paradox in a 1951 book called Social Choice and Individual Values.

In the field of study called political economy,economists make use of insights from the field of psychology.

How can we use the theories of asymmetric information to explain the fact that year-end bonuses are often paid to workers

Valerie prefers A to B and she prefers B to C.If Valerie's preferences are transitive,then she prefers A to C.

What is the classic example of moral hazard

What are the systematic mistakes humans are always making that prevent us from making rational decisions

Which characterization best describes the phenomenon of signalling

In economics,a difference in access to relevant knowledge is called a behavioural asymmetry.

The classic example of adverse selection is the market for used cars.

Under majority rule,what can we say about the order in which items are voted on

The 2001 Nobel Prize in Economics was awarded to George Akerlof,Michael Spence,and Joseph Stiglitz.The subject of their work described how actors on one side of the market had much better information than those on the other side.What is this topic called

Researchers have found that the systematic mistakes in people's decision making include a lack of confidence in their own abilities.

What does conventional economic theory assume about people

The moral hazard problem and the desire of firms to lessen that problem serve as a plausible explanation for a firm paying above-equilibrium wages to its workers.

A province is going to vote on how much money to spend building roads.Of the voting public,40 percent want to spend $5 billion,15 percent want to spend $10 billion,3 percent want to spend $15 billion,and 42 percent want to spend $20 billion.According to the median voter theorem,what is the winning amount

What type of problem is the temptation of imperfectly monitored workers to shirk their responsibilities