Exam 23: Frontiers of Microeconomics

The median voter is the voter exactly in the middle of a distribution.

Suppose an insurance company successfully screens drivers by offering two contracts. One contract is a policy with high premiums and comprehensive coverage, and the other a policy with low premiums and $1500 excess on each claim. This means that:

Asymmetric information is:

A way for employers to reduce shirking is to offer workers higher than equilibrium wages.

Suppose a consumer always goes to the same hairdresser to get her hair cut. Even after the hairdresser puts up the price of a cut by $5, the consumer doesn't switch to any hairdressers that are cheaper or more skilled. This means that the consumer is:

In the moral hazard problem the:

Political economy is also referred to as public:

What is the difference between a consumer who is a rational self-interest maximiser and a consumer who is a satisficer?

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

According to political economy, politicians:

Experiments suggest that people: (i) accurately estimate their own abilities (ii) give an appropriate weight to a small number of vivid observations (iii) interpret evidence to confirm beliefs they already have

If signalling is applied to advertising:

Arrow's impossibility theorem suggests that:

An implication of asymmetric information in the insurance market is that the price of health insurance may reflect the costs of a healthier-than-average person.

In the moral hazard problem the principal tends to undertake less effort than the agent considers desirable.

The median voter theorem can:

The median voter theorem is used to explain why parties in a two-party political system tend to put forward very different policies.

In the moral hazard problem the:

The median voter is:

Given asymmetric information, car insurance companies might encourage risky drivers to identify themselves by distributing a driving history questionnaire.