Question 1

In the context of a voting system, independence of irrelevant alternatives means that:

Accepted Answer

A) if everyone prefers A to B, then A should beat B 
B) if A beats B, and B beats C, then A should beat C 
C) there this no person that always gets his way, regardless of everyone else's preferences 
D) the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available 
A) if everyone prefers A to B, then A should beat B 
B) if A beats B, and B beats C, then A should beat C 
C) there this no person that always gets his way, regardless of everyone else's preferences 
D) the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available

Question 2

One implication of the lemons problem is that many people have an incentive to buy vehicles in the used car market..

Accepted Answer

A) True 
 B)False

Question 3

Private insurance companies:

Accepted Answer

A) have perfect information about how cautious homeowners are 
B) have less than perfect information about how cautious homeowners are 
C) do not face moral hazard problems 
D) cannot do anything to reduce the impact of the moral hazard problem 
A) have perfect information about how cautious homeowners are 
B) have less than perfect information about how cautious homeowners are 
C) do not face moral hazard problems 
D) cannot do anything to reduce the impact of the moral hazard problem

Question 4

The median voter theorem suggests that democratic institutions will produce the outcome desired by:

Accepted Answer

A) individuals with hidden characteristics 
B) only well-informed voters 
C) the median voter only if it is consistent with the preferences of the rest of the electorate 
D) the median voter, regardless of the preferences of the rest of the electorate 
A) individuals with hidden characteristics 
B) only well-informed voters 
C) the median voter only if it is consistent with the preferences of the rest of the electorate 
D) the median voter, regardless of the preferences of the rest of the electorate

Question 5

For signalling to work to solve adverse selection then: (i) it cannot be possible for the signal to be copied by sellers of low quality products
(ii) it credibly informs an uninformed party that the product is high quality
(iii) it must be restricted to the education market

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 6

The field of information asymmetry:

Accepted Answer

A) tends to view human behaviour as less complex than that found in conventional economic theory 
B) brings some of the insights from psychology into the study of economic issues 
C) applies the tools of economics to understand the functioning of government 
D) can shed light on the market for used cars 
A) tends to view human behaviour as less complex than that found in conventional economic theory 
B) brings some of the insights from psychology into the study of economic issues 
C) applies the tools of economics to understand the functioning of government 
D) can shed light on the market for used cars

Question 7

Studies suggest that:

Accepted Answer

A) the passage of time makes no difference to individuals' choices between two options 
B) individuals' choices may be inconsistent over time 
C) individuals' choices are always consistent over time 
D) none of the above 
A) the passage of time makes no difference to individuals' choices between two options 
B) individuals' choices may be inconsistent over time 
C) individuals' choices are always consistent over time 
D) none of the above

Question 8

Provide three example of inconsistent choice over time.

Accepted Answer

1. Smokers who promise themselves they w

Question 9

Arrow's impossibility theorem is named after the:

Accepted Answer

A) the ex-US president Walter Arrow 
B) economist, Kenneth Arrow 
C) direction that is required in order to rank possible outcomes 
D) French political theorist, Marquis de Arrow 
A) the ex-US president Walter Arrow 
B) economist, Kenneth Arrow 
C) direction that is required in order to rank possible outcomes 
D) French political theorist, Marquis de Arrow

Question 10

The problem of asymmetric information is absent in the moral hazard problem.

Accepted Answer

A) True 
 B)False

Question 11

The classic example of adverse selection is the market for oranges.

Accepted Answer

A) True 
 B)False

Question 12

An implication of the median voter theorem is that, in a democratic voting system:

Accepted Answer

A) minority views are not given much weight 
B) minority views are given significant weight 
C) the intensity of minority preferences play a central role in determining the outcome 
D) the outcome can best be described as a compromise that takes into account diverse preferences 
A) minority views are not given much weight 
B) minority views are given significant weight 
C) the intensity of minority preferences play a central role in determining the outcome 
D) the outcome can best be described as a compromise that takes into account diverse preferences

Question 13

One implication of the lemons problem is that:

Accepted Answer

A) a used car only a few days old will often sell for less than a new car of the same type 
B) many people have an incentive to buy vehicles in the used car market 
C) used cars have a market value almost identical to that of new cars 
D) buyers are just as aware of vehicle defects as the sellers of used cars 
A) a used car only a few days old will often sell for less than a new car of the same type 
B) many people have an incentive to buy vehicles in the used car market 
C) used cars have a market value almost identical to that of new cars 
D) buyers are just as aware of vehicle defects as the sellers of used cars

Question 14

The social scientist Herbert Simon is famous for his work in:

Accepted Answer

A) asymmetric information 
B) signalling theory 
C) voting systems 
D) Behavioural economics 
A) asymmetric information 
B) signalling theory 
C) voting systems 
D) Behavioural economics

Question 15

In the context of a voting system, unanimity means that:

Accepted Answer

A) if everyone prefers A to B, then A should beat B 
B) if A beats B, and B beats C, then A should beat C 
C) the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available 
D) there this no person that always gets his way, regardless of everyone else's preferences 
A) if everyone prefers A to B, then A should beat B 
B) if A beats B, and B beats C, then A should beat C 
C) the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available 
D) there this no person that always gets his way, regardless of everyone else's preferences

Question 16

When analysing labour and used car markets, economists recognise the existence of:

Accepted Answer

A) hidden action 
B) hidden characteristics 
C) none of the above 
D) all of the above 
A) hidden action 
B) hidden characteristics 
C) none of the above 
D) all of the above

Question 17

The field of information asymmetry:

Accepted Answer

A) tends to view human behaviour as less complex than that found in conventional economic theory 
B) brings some of the insights from psychology into the study of economic issues 
C) applies the tools of economics to understand the functioning of government 
D) includes topics such as adverse selection and moral hazard 
A) tends to view human behaviour as less complex than that found in conventional economic theory 
B) brings some of the insights from psychology into the study of economic issues 
C) applies the tools of economics to understand the functioning of government 
D) includes topics such as adverse selection and moral hazard

Question 18

An implication of asymmetric information in the insurance market is that:

Accepted Answer

A) insurance companies have perfect knowledge about the health problems of those who purchase insurance 
B) the price of health insurance may reflect the costs of a healthier-than-average person 
C) people with greater hidden health problems are more likely to buy health insurance than other people 
D) people in average health are encouraged to purchase health insurance 
A) insurance companies have perfect knowledge about the health problems of those who purchase insurance 
B) the price of health insurance may reflect the costs of a healthier-than-average person 
C) people with greater hidden health problems are more likely to buy health insurance than other people 
D) people in average health are encouraged to purchase health insurance

Question 19

Politicians are never motivated by self-interest.

Accepted Answer

A) True 
 B)False

Question 20

The Condorcet paradox reinforces the notion that:

Accepted Answer

A) majority rule ensures transitive preferences for society 
B) democratic institutions will produce the outcome desired by the median voter 
C) governments make better choices than markets 
D) majority rule does not ensure transitive preferences for society 
A) majority rule ensures transitive preferences for society 
B) democratic institutions will produce the outcome desired by the median voter 
C) governments make better choices than markets 
D) majority rule does not ensure transitive preferences for society

Exam 23: Frontiers of Microeconomics

In the context of a voting system, independence of irrelevant alternatives means that:

One implication of the lemons problem is that many people have an incentive to buy vehicles in the used car market..

Private insurance companies:

The median voter theorem suggests that democratic institutions will produce the outcome desired by:

For signalling to work to solve adverse selection then: (i) it cannot be possible for the signal to be copied by sellers of low quality products (ii) it credibly informs an uninformed party that the product is high quality (iii) it must be restricted to the education market

The field of information asymmetry:

Studies suggest that:

Provide three example of inconsistent choice over time.

Arrow's impossibility theorem is named after the:

The problem of asymmetric information is absent in the moral hazard problem.

The classic example of adverse selection is the market for oranges.

An implication of the median voter theorem is that, in a democratic voting system:

One implication of the lemons problem is that:

The social scientist Herbert Simon is famous for his work in:

In the context of a voting system, unanimity means that:

When analysing labour and used car markets, economists recognise the existence of:

The field of information asymmetry:

An implication of asymmetric information in the insurance market is that:

Politicians are never motivated by self-interest.

The Condorcet paradox reinforces the notion that:

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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