Question 1

In corporations, which of the following are agents but not principals?

Accepted Answer

A)  shareholders 
B)  the board of directors 
C)  managers 
D)  workers 
A)  shareholders 
B)  the board of directors 
C)  managers 
D)  workers

Question 2

Table 22-9
Voter Type
  
-Refer to Table 22-9. The table shows the preferences of four types of voters over four possible outcomes: A, B, C, and D. In addition, the table shows the percentage of voters of each type. Suppose that, for some reason, D is eliminated as a possible option. Using a Borda count election, with 3 points for the best choice, 2 points for the second best choice, and 1 point for the last choice, which outcome would win this election?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  There would be a three-way tie. 
A)  A 
B)  B 
C)  C 
D)  There would be a three-way tie.

Question 3

Suppose the voters in a small country are choosing between two options, A and B. After the voting is complete it is discovered that option A received 100% of the votes with option B receiving no votes. After the vote, however, the country's leader decides that option B is better for the people and implements B rather than A. The voting system in this country fails which of Arrow's properties of a desirable voting system?

Accepted Answer

A)  unanimity 
B)  transitivity 
C)  independence of irrelevant alternatives 
D)  No dictators 
A)  unanimity 
B)  transitivity 
C)  independence of irrelevant alternatives 
D)  No dictators

Question 4

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 5

If A is preferred to B and B is preferred to C, then we would expect A to be preferred to C. This property is called

Accepted Answer

The answer of If A is preferred to B and...

Question 6

Which of the following would violate transitivity?

Accepted Answer

A)  Vanessa likes A more than B, C more than B, and C more than A. 
B)  Jay likes C more than B, A more than B, B more than D, and C more than D. 
C)  Maddy likes C more than A, B more than D, A more than B, and D more than C. 
D)  Victoria likes C more than B, C more than D, and B more than D. 
A)  Vanessa likes A more than B, C more than B, and C more than A. 
B)  Jay likes C more than B, A more than B, B more than D, and C more than D. 
C)  Maddy likes C more than A, B more than D, A more than B, and D more than C. 
D)  Victoria likes C more than B, C more than D, and B more than D.

Question 7

Insurance companies charge annual premiums to collect revenue, which they then use to pay customers who file claims for damages they incur. Because of the moral hazard problem insurance companies separate customers into groups. Group 1: customers who file few claims & Group 2: customers that file a lot of claims. After creating these groups, what happens to the average annual premium within a group?

Accepted Answer

A)  Group 1: average annual premium increases Group 2: average annual premium increases 
B)  Group 1: average annual premium decreases Group 2: average annual premium increases 
C)  Group 1: average annual premium increases Group 2: average annual premium decreases 
D)  Group 1: average annual premium decreases Group 2: average annual premium decreases 
A)  Group 1: average annual premium increases Group 2: average annual premium increases 
B)  Group 1: average annual premium decreases Group 2: average annual premium increases 
C)  Group 1: average annual premium increases Group 2: average annual premium decreases 
D)  Group 1: average annual premium decreases Group 2: average annual premium decreases

Question 8

Arrow's impossibility theorem shows that it is impossible to find a better voting system than pairwise majority voting.

Accepted Answer

A) True 
 B)False

Question 9

Table 22-11
Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
  
-Refer to Table 22-11. Which pairwise voting scheme would result in outcome A?

Accepted Answer

A)  First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B)  First, choose between A and C. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and D. 
C)  First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D)  First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B. 
A)  First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B)  First, choose between A and C. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and D. 
C)  First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D)  First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B.

Question 10

Table 22-18
The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences.
  
-Refer to Table 22-18. If the vote is conducted using a Borda count where each person's first choice receives 4 points, each person's second choice 3 points, each person's third choice 2 points, and each person's fourth choice 1 point, which alternative would win?

Accepted Answer

A)  W 
B)  X 
C)  Y 
D)  Z 
A)  W 
B)  X 
C)  Y 
D)  Z

Question 11

In the employer-worker relationship, the employer is regarded as the "principal" and the worker is regarded as the "agent."

Accepted Answer

A) True 
 B)False

Question 12

In a vote between options A, B, and C, option C wins. When option B is eliminated and a vote is taken between option A and option C, option A wins. The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

Accepted Answer

A)  unanimity 
B)  transitivity 
C)  independence of irrelevant alternatives 
D)  No dictators 
A)  unanimity 
B)  transitivity 
C)  independence of irrelevant alternatives 
D)  No dictators

Question 13

Riley travels a great deal, and over the past several years he has read dozens of reviews of hotel chains, all of which rave about the clean rooms and great service at Comeon Inns. Last month, Riley checked into a room at a Comeon Inn for the first time, only to find the room filthy and the service lousy. He decided the Comeon Inn chain is inferior to other hotel chains.

Accepted Answer

A)  Riley was irrational to have believed the reviews that he had read. 
B)  Riley was rational to have changed his mind about Comeon Inns based on his one experience. 
C)  Riley is an example of someone who gives too much weight to a small number of vivid observations. 
D)  Riley is an example of someone who is reluctant to change his mind. 
A)  Riley was irrational to have believed the reviews that he had read. 
B)  Riley was rational to have changed his mind about Comeon Inns based on his one experience. 
C)  Riley is an example of someone who gives too much weight to a small number of vivid observations. 
D)  Riley is an example of someone who is reluctant to change his mind.

Question 14

In corporations, which of the following are principals but not agents?

Accepted Answer

A)  shareholders 
B)  the board of directors 
C)  managers 
D)  workers 
A)  shareholders 
B)  the board of directors 
C)  managers 
D)  workers

Question 15

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Accepted Answer

A)  people are overconfident 
B)  people give too much weight to a small number of vivid observations 
C)  people are reluctant to change their minds 
D)  All of the above are correct. 
A)  people are overconfident 
B)  people give too much weight to a small number of vivid observations 
C)  people are reluctant to change their minds 
D)  All of the above are correct.

Question 16

Kenneth Arrow proved that the voting system that satisfied all of the properties of his "perfect" voting system was

Accepted Answer

A)  one in which a single person (a "dictator") imposes his preferences on everyone else. 
B)  pairwise majority voting. 
C)  majority voting that is not pairwise. 
D)  None of the above is correct. Arrow proved that no voting system can satisfy all of the properties of his "perfect" system. 
A)  one in which a single person (a "dictator") imposes his preferences on everyone else. 
B)  pairwise majority voting. 
C)  majority voting that is not pairwise. 
D)  None of the above is correct. Arrow proved that no voting system can satisfy all of the properties of his "perfect" system.

Question 17

Table 22-11
Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
  
-Refer to Table 22-11. If the vote were conducted according to a Borda count system where each person's first choice receives 4 points, second choice 3 points, third choice 2 points and fourth choice 1 point, the result would be

Accepted Answer

A)  that A would win. 
B)  that B would win. 
C)  that C would win. 
D)  a tie between A and D. 
A)  that A would win. 
B)  that B would win. 
C)  that C would win. 
D)  a tie between A and D.

Question 18

A radio story reported a study on the makes and models of cars that were observed going through intersections in the Washington, D.C. area without stopping at the stop signs. According to the story, Volvos were heavily overrepresented; the fraction of cars running stop signs that were Volvos was much greater than the fraction of Volvos in the total population of cars in the D.C. area. This is initially surprising because Volvo has built a reputation as an especially safe car that appeals to sensible, safety-conscious drivers. How is this observation best explained?

Accepted Answer

A)  Volvo drivers are not willing to take risks that they would take in another, less safe car. Driving a Volvo leads to a propensity to run stop signs. 
B)  Volvo drivers are not willing to take risks that they would take in another, less safe car. Driving a Volvo reduces the propensity to run stop signs. 
C)  Volvo drivers are willing to take risks that they would not take in another, less safe car. Driving a Volvo reduces the propensity to run stop signs. 
D)  Volvo drivers are willing to take risks that they would not take in another, less safe car. Driving a Volvo leads to a propensity to run stop signs. 
A)  Volvo drivers are not willing to take risks that they would take in another, less safe car. Driving a Volvo leads to a propensity to run stop signs. 
B)  Volvo drivers are not willing to take risks that they would take in another, less safe car. Driving a Volvo reduces the propensity to run stop signs. 
C)  Volvo drivers are willing to take risks that they would not take in another, less safe car. Driving a Volvo reduces the propensity to run stop signs. 
D)  Volvo drivers are willing to take risks that they would not take in another, less safe car. Driving a Volvo leads to a propensity to run stop signs.

Question 19

Maria and Jose installed a "nanny­camera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?

Accepted Answer

The answer of Maria and Jose installed a "nanny­camera" in...

Question 20

Economic policy that appears to be ideal in an economics textbook may not be the final policy that is approved by elected politicians because

Accepted Answer

A)  sometimes a politician's self interest may conflict with the national interest. 
B)  economics professors have a notoriously low voting rate. 
C)  only policies advocated by the President's Council of Economic Advisors receive enough national attention to interest politicians. 
D)  Economists cannot explain why politicians do not implement the ideas from their textbooks. 
A)  sometimes a politician's self interest may conflict with the national interest. 
B)  economics professors have a notoriously low voting rate. 
C)  only policies advocated by the President's Council of Economic Advisors receive enough national attention to interest politicians. 
D)  Economists cannot explain why politicians do not implement the ideas from their textbooks.

In corporations, which of the following are agents but not principals?

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.

If A is preferred to B and B is preferred to C, then we would expect A to be preferred to C. This property is called

Which of the following would violate transitivity?

Arrow's impossibility theorem shows that it is impossible to find a better voting system than pairwise majority voting.

Table 22-11 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-11. Which pairwise voting scheme would result in outcome A?

In the employer-worker relationship, the employer is regarded as the "principal" and the worker is regarded as the "agent."

In a vote between options A, B, and C, option C wins. When option B is eliminated and a vote is taken between option A and option C, option A wins. The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

In corporations, which of the following are principals but not agents?

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Kenneth Arrow proved that the voting system that satisfied all of the properties of his "perfect" voting system was

Maria and Jose installed a "nannycamera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?

Economic policy that appears to be ideal in an economics textbook may not be the final policy that is approved by elected politicians because

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

Filters

Exam 22: Frontiers of Microeconomics

In corporations, which of the following are agents but not principals?

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.

If A is preferred to B and B is preferred to C, then we would expect A to be preferred to C. This property is called

Which of the following would violate transitivity?

Arrow's impossibility theorem shows that it is impossible to find a better voting system than pairwise majority voting.

Table 22-11 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-11. Which pairwise voting scheme would result in outcome A?

In the employer-worker relationship, the employer is regarded as the "principal" and the worker is regarded as the "agent."

In a vote between options A, B, and C, option C wins. When option B is eliminated and a vote is taken between option A and option C, option A wins. The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

In corporations, which of the following are principals but not agents?

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Kenneth Arrow proved that the voting system that satisfied all of the properties of his "perfect" voting system was

Maria and Jose installed a "nanny­camera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?

Economic policy that appears to be ideal in an economics textbook may not be the final policy that is approved by elected politicians because

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

Filters

Maria and Jose installed a "nannycamera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?