Question 1

Private markets sometimes deal with asymmetric information through:

Accepted Answer

A) behavioural economics 
B) command and control 
C) signalling and screening 
D) political economy 
A) behavioural economics 
B) command and control 
C) signalling and screening 
D) political economy

Question 2

If large numbers of people purchase flood insurance after a widely reported flood in Sydney, this may be a case:

Accepted Answer

A) where people interpret evidence to confirm their pre-existing beliefs 
B) of moral hazard 
C) where people give weight to a small number of vivid observations 
D) where people overestimate their ability 
A) where people interpret evidence to confirm their pre-existing beliefs 
B) of moral hazard 
C) where people give weight to a small number of vivid observations 
D) where people overestimate their ability

Question 3

Suppose a voting system is implemented and this shows that B is preferred toA.
 A third option C then becomes available. Independence of irrelevant outcomes means that the system would still prefer B toA.

Accepted Answer

A) True 
 B)False

Question 4

Results of the ultimatum game suggest that considerations of fairness may play a role in economic behaviour.

Accepted Answer

A) True 
 B)False

Question 5

Suppose two players are playing the ultimatum game, and Player A has to propose a division of $100 between the two players. What is the Nash equilibrium for this game, and is it the usual result of the game when it is played? What does it tell us about people's attitudes towards fairness?

Accepted Answer

.
The Nash equilibrium for this game is

Question 6

Sceptical buyers in the used car market:

Accepted Answer

A) are likely to pay a relatively high price for a used car 
B) realise that asymmetric information is irrelevant in the used car market 
C) are likely to pay a relatively low price for a used car 
D) none of the above 
A) are likely to pay a relatively high price for a used car 
B) realise that asymmetric information is irrelevant in the used car market 
C) are likely to pay a relatively low price for a used car 
D) none of the above

Question 7

What properties did Arrow assume a society would want in a voting system?

Accepted Answer

1. unanimity
2. tran

Question 8

How has the Internet helped markets respond to problems of asymmetric information in buying cars?

Accepted Answer

.
Consumers can become better informed a

Question 9

In the employment relationship, the employer:

Accepted Answer

A) and worker are both agents 
B) and worker are both principals 
C) is the principal and the worker is the agent 
D) is the agent and the worker is the principal 
A) and worker are both agents 
B) and worker are both principals 
C) is the principal and the worker is the agent 
D) is the agent and the worker is the principal

Question 10

Herbert Simon suggested that people should be treated as satisficers rather than rational maximisers.

Accepted Answer

A) True 
 B)False

Question 11

Experiments suggest that people: (i) lack confidence in their own abilities
(ii) give too much weight to a small number of vivid observations
(iii) interpret evidence to confirm beliefs they already have

Accepted Answer

A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii) 
A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (ii) and (iii)

Question 12

The median voter theorem suggests that democratic institutions will produce the outcome desired by the median voter, regardless of the preferences of the rest of the electorate.

Accepted Answer

A) True 
 B)False

Question 13

Screening takes place when an:

Accepted Answer

A) uninformed party takes actions to induce an informed party to reveal private information 
B) informed party takes actions to reveal his or her private information 
C) informed party takes actions to induce an uninformed party to reveal private information 
D) informed party takes actions to reveal his or her publicly available information 
A) uninformed party takes actions to induce an informed party to reveal private information 
B) informed party takes actions to reveal his or her private information 
C) informed party takes actions to induce an uninformed party to reveal private information 
D) informed party takes actions to reveal his or her publicly available information

Question 14

Studies suggest that the passage of time makes no difference to individuals' choices between two options.

Accepted Answer

A) True 
 B)False

Question 15

Results of the ultimatum game suggests that:

Accepted Answer

A) considerations of fairness may play a role in economic behaviour 
B) considerations of fairness play no role in economic behaviour 
C) economists should abandon assumptions of individual self-interest in their models 
D) none of the above 
A) considerations of fairness may play a role in economic behaviour 
B) considerations of fairness play no role in economic behaviour 
C) economists should abandon assumptions of individual self-interest in their models 
D) none of the above

Question 16

What are two implications of the Condorcet paradox?

Accepted Answer

1. The order on which things a

Question 17

Arrow's impossibility theorem suggests that:

Accepted Answer

A) any voting system society adopts for aggregating the preferences of its members will be flawed 
B) a voting system will be ideal if some form of dictatorship is allowed 
C) a voting system will be ideal if the properties of intransitivity and dependence of irrelevant alternatives are satisfied 
D) none of the above 
A) any voting system society adopts for aggregating the preferences of its members will be flawed 
B) a voting system will be ideal if some form of dictatorship is allowed 
C) a voting system will be ideal if the properties of intransitivity and dependence of irrelevant alternatives are satisfied 
D) none of the above

Question 18

When the international trade in ivory occurred, poached elephant ivory was sold alongside legal ivory. Given that poached ivory had an important, undesirable attribute, the possible reasons why the two products were sold in the same market were:

Accepted Answer

A) elephants were very difficult to monitor in the wild 
B) legal suppliers could not credibly signal their product was not poached 
C) buyers had less information about the ivory than the smugglers 
D) all of the above 
A) elephants were very difficult to monitor in the wild 
B) legal suppliers could not credibly signal their product was not poached 
C) buyers had less information about the ivory than the smugglers 
D) all of the above

Question 19

If Anne finds it difficult to stick to a diet, she might be exhibiting:

Accepted Answer

A) inconsistency over time 
B) asymmetric information 
C) moral hazard 
D) adverse selection 
A) inconsistency over time 
B) asymmetric information 
C) moral hazard 
D) adverse selection

Question 20

An implication of the median voter theorem is that, in a democratic voting system, minority views are given significant weight.

Accepted Answer

A) True 
 B)False

Exam 23: Frontiers of Microeconomics

Private markets sometimes deal with asymmetric information through:

If large numbers of people purchase flood insurance after a widely reported flood in Sydney, this may be a case:

Suppose a voting system is implemented and this shows that B is preferred toA. A third option C then becomes available. Independence of irrelevant outcomes means that the system would still prefer B toA.

Results of the ultimatum game suggest that considerations of fairness may play a role in economic behaviour.

Suppose two players are playing the ultimatum game, and Player A has to propose a division of $100 between the two players. What is the Nash equilibrium for this game, and is it the usual result of the game when it is played? What does it tell us about people's attitudes towards fairness?

Sceptical buyers in the used car market:

What properties did Arrow assume a society would want in a voting system?

How has the Internet helped markets respond to problems of asymmetric information in buying cars?

In the employment relationship, the employer:

Herbert Simon suggested that people should be treated as satisficers rather than rational maximisers.

Experiments suggest that people: (i) lack confidence in their own abilities (ii) give too much weight to a small number of vivid observations (iii) interpret evidence to confirm beliefs they already have

The median voter theorem suggests that democratic institutions will produce the outcome desired by the median voter, regardless of the preferences of the rest of the electorate.

Screening takes place when an:

Studies suggest that the passage of time makes no difference to individuals' choices between two options.

Results of the ultimatum game suggests that:

What are two implications of the Condorcet paradox?

Arrow's impossibility theorem suggests that:

When the international trade in ivory occurred, poached elephant ivory was sold alongside legal ivory. Given that poached ivory had an important, undesirable attribute, the possible reasons why the two products were sold in the same market were:

If Anne finds it difficult to stick to a diet, she might be exhibiting:

An implication of the median voter theorem is that, in a democratic voting system, minority views are given significant weight.

Ten Lessons From 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

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity 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 Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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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