Question 1

Which of the following sets of preferences can not satisfy the property of transitivity?

Accepted Answer

A)  Plan A is preferred to plan D.Plan D is preferred to plan B.Plan C is preferred to plan B. 
B)  Plan A is preferred to plan B.Plan B is preferred to plan C.Plan A is preferred to plan C. 
C)  Plan C is preferred to plan A.Plan B is preferred to plan A.Plan C is preferred to plan B. 
D)  Plan D is preferred to plan C.Plan C is preferred to plan B.Plan B is preferred to plan D. 
A)  Plan A is preferred to plan D.Plan D is preferred to plan B.Plan C is preferred to plan B. 
B)  Plan A is preferred to plan B.Plan B is preferred to plan C.Plan A is preferred to plan C. 
C)  Plan C is preferred to plan A.Plan B is preferred to plan A.Plan C is preferred to plan B. 
D)  Plan D is preferred to plan C.Plan C is preferred to plan B.Plan B is preferred to plan D. D

Question 2

Under majority rule,the order in which items are voted on is

Accepted Answer

A)  unimportant,and this is a lesson of the Condorcet paradox. 
B)  unimportant,and this is a lesson of Arrow's impossibility theorem. 
C)  important,and this is a lesson of the Condorcet paradox. 
D)  important,and this is a lesson of Arrow's impossibility theorem. 
A)  unimportant,and this is a lesson of the Condorcet paradox. 
B)  unimportant,and this is a lesson of Arrow's impossibility theorem. 
C)  important,and this is a lesson of the Condorcet paradox. 
D)  important,and this is a lesson of Arrow's impossibility theorem. C

Question 3

When Republicans and Democrats offer similar platforms in an election campaign,a likely explanation is the

Accepted Answer

A)  Arrow impossibility theorem. 
B)  Condorcet paradox. 
C)  median voter theorem. 
D)  fact that politicians are more interested in the national interest than their own self-interest. 
A)  Arrow impossibility theorem. 
B)  Condorcet paradox. 
C)  median voter theorem. 
D)  fact that politicians are more interested in the national interest than their own self-interest. C

Question 4

Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

Accepted Answer

Drivers (buyers and potential buyers of

Question 5

The Borda count fails to satisfy which of Kenneth Arrow's properties of a "perfect" voting system?

Accepted Answer

A)  no dictator 
B)  unanimity 
C)  transitivity 
D)  independence of irrelevant alternatives 
A)  no dictator 
B)  unanimity 
C)  transitivity 
D)  independence of irrelevant alternatives

Question 6

Scenario 22-3
Three candidates,Frank,Brian,and Wanda,are running for office.There are three voters in the upcoming election: Henry,Diane,and Linda.Henry prefers Brian over Frank and Frank over Wanda.Diane prefers Wanda over Brian and Brian over Frank.Linda prefers Frank over Brian and Brian over Wanda.
-Refer to Scenario 22-3.If the voters were given a choice of Brian versus Wanda first,then the winner was in a second election versus Frank,who would win?

Accepted Answer

A)  Frank 
B)  Brian 
C)  Wanda 
D)  There is not enough information to answer this question. 
A)  Frank 
B)  Brian 
C)  Wanda 
D)  There is not enough information to answer this question.

Question 7

The buyer runs a risk of being sold a good of low quality when there is

Accepted Answer

A)  a principal-agent problem. 
B)  a moral-hazard problem. 
C)  a problem involving hidden actions. 
D)  a problem involving hidden characteristics. 
A)  a principal-agent problem. 
B)  a moral-hazard problem. 
C)  a problem involving hidden actions. 
D)  a problem involving hidden characteristics.

Question 8

Table 22-6
  
-Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: X,Y,and Z.The table also shows the percentage of voters of each type.Based on this information,which voter type is the median voter?

Accepted Answer

A)  Type 1 
B)  Type 2 
C)  Type 3 
D)  The median voter cannot be determined without knowing the pair of outcomes from which the voters will be choosing. 
A)  Type 1 
B)  Type 2 
C)  Type 3 
D)  The median voter cannot be determined without knowing the pair of outcomes from which the voters will be choosing.

Question 9

An airline knows that business travelers have more inelastic demand for travel than vacationers.That is,business travelers are often willing to pay more for airline tickets than vacationers.The airline also knows that business travelers do not like to travel over weekends.When customers request airline tickets that do not involve travel over a weekend,the airline determines that a traveler is likely a business traveler and charges a higher price.This is an example of

Accepted Answer

A)  moral hazard. 
B)  signaling. 
C)  screening. 
D)  adverse selection. 
A)  moral hazard. 
B)  signaling. 
C)  screening. 
D)  adverse selection.

Question 10

Which of the following is a characteristic of a corporation but not of a small family-owned business?

Accepted Answer

A)  The firm buys inputs in markets for the factors of production. 
B)  The firm sells output in markets for goods and services. 
C)  The firm is guided in its decisions by the objective of profit maximization. 
D)  The firm faces a principal-agent problem created by the separation of ownership and control. 
A)  The firm buys inputs in markets for the factors of production. 
B)  The firm sells output in markets for goods and services. 
C)  The firm is guided in its decisions by the objective of profit maximization. 
D)  The firm faces a principal-agent problem created by the separation of ownership and control.

Question 11

Normally,we expect voters' preferences to exhibit a property called

Accepted Answer

A)  transitivity. 
B)  transversality. 
C)  normality. 
D)  universality. 
A)  transitivity. 
B)  transversality. 
C)  normality. 
D)  universality.

Question 12

Recent developments in political economy

Accepted Answer

A)  render much of the traditional field of political science obsolete. 
B)  render much of the traditional field of economics obsolete. 
C)  illustrate the resolute nature of democracy. 
D)  point to the fact that government is a less-than-perfect institution. 
A)  render much of the traditional field of political science obsolete. 
B)  render much of the traditional field of economics obsolete. 
C)  illustrate the resolute nature of democracy. 
D)  point to the fact that government is a less-than-perfect institution.

Question 13

If preferences exhibit the property of transitivity,then

Accepted Answer

A)  the preferences are irrational. 
B)  individuals prefer more government involvement in private markets than do people whose preferences are not transitive. 
C)  preferences change over time more quickly than when preferences are not transitive. 
D)  preferences satisfy one of the properties assumed to be desireable by Kenneth Arrow in Social Choice and Individual Values. 
A)  the preferences are irrational. 
B)  individuals prefer more government involvement in private markets than do people whose preferences are not transitive. 
C)  preferences change over time more quickly than when preferences are not transitive. 
D)  preferences satisfy one of the properties assumed to be desireable by Kenneth Arrow in Social Choice and Individual Values.

Question 14

Frequently it is the case that: (1)A worker knows more than his employer about how much effort he puts into his job,and (2)the seller of a used car knows more than the buyer about the car's condition.

Accepted Answer

A)  Neither (1)nor (2)serves as an example of asymmetric information. 
B)  Both (1)and (2)serve as examples of asymmetric information. 
C)  Neither (1)nor (2)serves as an example of a hidden action. 
D)  Both (1)and (2)serve as examples of hidden action. 
A)  Neither (1)nor (2)serves as an example of asymmetric information. 
B)  Both (1)and (2)serve as examples of asymmetric information. 
C)  Neither (1)nor (2)serves as an example of a hidden action. 
D)  Both (1)and (2)serve as examples of hidden action.

Question 15

The Condorcet voting paradox shows that outcomes based on dictatorial preferences do not always obey the property of transitivity.

Accepted Answer

A) True 
 B)False

Question 16

A person who makes decisions that are "merely good enough" is called a(n)

Accepted Answer

A)  optimizer. 
B)  rational person. 
C)  satisficer. 
D)  maxi-minimizer. 
A)  optimizer. 
B)  rational person. 
C)  satisficer. 
D)  maxi-minimizer.

Question 17

Asymmetric information

Accepted Answer

A)  is not an area of current research in economics. 
B)  can take the form of a hidden action or a hidden characteristic. 
C)  explains Arrow's impossibility theorem. 
D)  is uncommon in corporate management. 
A)  is not an area of current research in economics. 
B)  can take the form of a hidden action or a hidden characteristic. 
C)  explains Arrow's impossibility theorem. 
D)  is uncommon in corporate management.

Question 18

Which of the following is not an example of a moral hazard problem?

Accepted Answer

A)  A manager stays late one evening so that her employee can leave early to attend his child's music recital. 
B)  A small child takes an extra cookie from the cookie jar when he thinks his mom isn't watching him closely. 
C)  An employee plays solitaire on her computer at 4:30 p.m.on a Friday when her boss has left for the day. 
D)  A customer whose new eyeglasses come with a "60-day insurance policy in case of breakage" leaves her glasses out where her new puppy can chew on them. 
A)  A manager stays late one evening so that her employee can leave early to attend his child's music recital. 
B)  A small child takes an extra cookie from the cookie jar when he thinks his mom isn't watching him closely. 
C)  An employee plays solitaire on her computer at 4:30 p.m.on a Friday when her boss has left for the day. 
D)  A customer whose new eyeglasses come with a "60-day insurance policy in case of breakage" leaves her glasses out where her new puppy can chew on them.

Question 19

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

Accepted Answer

A) True 
 B)False

Question 20

Scenario 22-4
Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection.The three choices are: a stoplight,a 4-way stop,and a 2-way stop.The voters are divided into three groups based on their preferences.
Voter Type
  
-Refer to Scenario 22-4.Based on the information in the table,which of the following statements is true?

Accepted Answer

A)  In a vote between a 2-way stop and a stoplight,stoplight wins because 40% of voters have stoplight as their 1st choice. 
B)  In a vote between a 2-way stop and a 4-way stop,the 4-way stop wins getting 80% of the total vote. 
C)  In a vote between a 4-way stop and a stoplight,there is a tie because each gets 40% of the vote. 
D)  None of the above are true. 
A)  In a vote between a 2-way stop and a stoplight,stoplight wins because 40% of voters have stoplight as their 1st choice. 
B)  In a vote between a 2-way stop and a 4-way stop,the 4-way stop wins getting 80% of the total vote. 
C)  In a vote between a 4-way stop and a stoplight,there is a tie because each gets 40% of the vote. 
D)  None of the above are true.

Exam 22: Frontiers of Microeconomics

Which of the following sets of preferences can not satisfy the property of transitivity?

Under majority rule,the order in which items are voted on is

When Republicans and Democrats offer similar platforms in an election campaign,a likely explanation is the

Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

The Borda count fails to satisfy which of Kenneth Arrow's properties of a "perfect" voting system?

The buyer runs a risk of being sold a good of low quality when there is

Table 22-6 -Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: X,Y,and Z.The table also shows the percentage of voters of each type.Based on this information,which voter type is the median voter?

Which of the following is a characteristic of a corporation but not of a small family-owned business?

Normally,we expect voters' preferences to exhibit a property called

Recent developments in political economy

If preferences exhibit the property of transitivity,then

Frequently it is the case that: (1)A worker knows more than his employer about how much effort he puts into his job,and (2)the seller of a used car knows more than the buyer about the car's condition.

The Condorcet voting paradox shows that outcomes based on dictatorial preferences do not always obey the property of transitivity.

A person who makes decisions that are "merely good enough" is called a(n)

Asymmetric information

Which of the following is not an example of a moral hazard problem?

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

Ten Principles of 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

Monopolistic Competition

Oligopoly

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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