Question 1

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "unanimity" to mean

Accepted Answer

A)  A beats B only if everyone prefers A to B. 
B)  if everyone prefers A to B, then A beats B. 
C)  if A beats B and B beats C, then A must best C. 
D)  everyone who is eligible to vote must vote; otherwise, the outcome is invalid. 
A)  A beats B only if everyone prefers A to B. 
B)  if everyone prefers A to B, then A beats B. 
C)  if A beats B and B beats C, then A must best C. 
D)  everyone who is eligible to vote must vote; otherwise, the outcome is invalid.

Question 2

Table 22-22
The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below.
  
-Refer to Table 22-22. The median voter is one who prefers to spend

Accepted Answer

A)  $12 million. 
B)  $16 million 
C)  $20 million. 
D)  None of the above are correct. 
A)  $12 million. 
B)  $16 million 
C)  $20 million. 
D)  None of the above are correct.

Question 3

Table 22-2
Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their Sunday afternoon. They all agree that they should do one of three things: go to a movie, play golf, or go to a baseball game. They also agree that they will have two pairwise votes to determine how to spend their afternoon, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the table below.
  
-Refer to Table 22-2. If Allen, Brian, and Cody use a Borda count, rather than pairwise majority voting, to decide how to spend their afternoon, then they will

Accepted Answer

A)  watch a movie. 
B)  play golf. 
C)  watch a baseball game. 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance. 
A)  watch a movie. 
B)  play golf. 
C)  watch a baseball game. 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance.

Question 4

Table 22-5
The citizens of Anytown will decide whether to build a new library, a recreation center, or an arena. Exactly one of the three choices will prevail, and the choice will be made by way of pairwise voting, with the majority determining the outcome on each vote. The preferences of the voters are summarized in the table below.
Voter Type
  
-Refer to Table 22-5. Which of the following statements is correct?

Accepted Answer

A)  In a pairwise election, "arena" beats "library." 
B)  In a pairwise election, "library" beats "recreation center." 
C)  In a pairwise election, "recreation center" beats "arena." 
D)  All of the above are correct. 
A)  In a pairwise election, "arena" beats "library." 
B)  In a pairwise election, "library" beats "recreation center." 
C)  In a pairwise election, "recreation center" beats "arena." 
D)  All of the above are correct.

Question 5

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Accepted Answer

A)  signaling. 
B)  screening. 
C)  monitoring. 
D)  principal. 
A)  signaling. 
B)  screening. 
C)  monitoring. 
D)  principal.

Question 6

Scenario 22-4
Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza. Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne. Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti.
-Refer to Scenario 22-4. 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 election winner would be

Accepted Answer

A)  pizza. 
B)  ravioli. 
C)  lasagne. 
D)  spaghetti. 
A)  pizza. 
B)  ravioli. 
C)  lasagne. 
D)  spaghetti.

Question 7

Kris and Kelly have been dating for several years. Kris loves Kelly very much and wants to marry her. Which of the following is the best way to signal his love to her?

Accepted Answer

A)  Kris should buy Kelly a box of his favorite chocolates. 
B)  Kris should give Kelly $15,000 cash to purchase her own engagement ring, since he doesn't know what kind she would like. 
C)  Kris should buy Kelly the diamond ring that she has been looking at recently in the jewelry store window. 
D)  Kris should send Kelly a text asking for her hand in marriage. 
A)  Kris should buy Kelly a box of his favorite chocolates. 
B)  Kris should give Kelly $15,000 cash to purchase her own engagement ring, since he doesn't know what kind she would like. 
C)  Kris should buy Kelly the diamond ring that she has been looking at recently in the jewelry store window. 
D)  Kris should send Kelly a text asking for her hand in marriage.

Question 8

According to the median voter theorem, majority rule will

Accepted Answer

A)  always produce an inconclusive outcome. 
B)  produce the outcome least preferred by the median voter. 
C)  produce the outcome most preferred by the median voter. 
D)  produce an outcome that is inconsistent with transitive preferences. 
A)  always produce an inconclusive outcome. 
B)  produce the outcome least preferred by the median voter. 
C)  produce the outcome most preferred by the median voter. 
D)  produce an outcome that is inconsistent with transitive preferences.

Question 9

Table 22-2
Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their Sunday afternoon. They all agree that they should do one of three things: go to a movie, play golf, or go to a baseball game. They also agree that they will have two pairwise votes to determine how to spend their afternoon, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the table below.
  
-Refer to Table 22-2. Which of the following statements is correct?

Accepted Answer

A)  In a pairwise election, "golf" beats "movie." 
B)  In a pairwise election, "baseball game" beats "golf." 
C)  In a pairwise election, "movie" beats "baseball game." 
D)  All of the above are correct. 
A)  In a pairwise election, "golf" beats "movie." 
B)  In a pairwise election, "baseball game" beats "golf." 
C)  In a pairwise election, "movie" beats "baseball game." 
D)  All of the above are correct.

Question 10

Table 22-25
Sophie, Huan, and Santiago are lost with no map or GPS available. They come to an intersection at which they can turn left, turn right, or continue going straight. Their preferences are summarized in the table.
  
-Refer to Table 22-25. If the travelers decide to use a Borda count, what is the result?

Accepted Answer

The answer of Table 22-25
Sophie, Huan, and Santiago are lost...

Question 11

Table 22-23
The town of Franklin is facing a severe budget shortage. The town administrator has proposed four options to balance the budget: increase property taxes (taxes), cut the school arts budget (arts), turn off half of the streetlights in the town (streetlights), reduce police patrols (police). Exactly one of the four choices will prevail, and the choice will be made by way of pairwise voting, with the majority determining the outcome on each vote. The preferences of the voters are summarized in the table below.
Voter Type
  
-Refer to Table 22-23. If a Borda count is used, which option will win?

Accepted Answer

The answer of Table 22-23
The town of Franklin is facing...

Question 12

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

Accepted Answer

A)  The employer pays his workers wages that are unusually high for the industry and region. 
B)  The employer pays his employees year-end bonuses depending to how well the business does and his observations of the employees' efforts. 
C)  The employer has voluntarily removed video cameras from the factory floor. 
D)  Both A and B are correct. 
A)  The employer pays his workers wages that are unusually high for the industry and region. 
B)  The employer pays his employees year-end bonuses depending to how well the business does and his observations of the employees' efforts. 
C)  The employer has voluntarily removed video cameras from the factory floor. 
D)  Both A and B are correct.

Question 13

Table 22-20
The table below shows the preferred city budget (in millions) for in the city of Springfield.
  
-Refer to Table 22-20. In an election, each voter will select the budget closest to his or her most preferred budget. In which of the following cases does a budget of $32 win?

Accepted Answer

A)  $32 versus $10, and $32 versus $40 
B)  $32 versus $10, but not $32 versus $40 
C)  $32 versus $40, but not $32 versus $10 
D)  Neither $32 versus $10 nor $32 versus $40 
A)  $32 versus $10, and $32 versus $40 
B)  $32 versus $10, but not $32 versus $40 
C)  $32 versus $40, but not $32 versus $10 
D)  Neither $32 versus $10 nor $32 versus $40

Question 14

When new professors are hired, their job performance is monitored closely. If they meet their institution's standards, they will eventually receive tenure. After receiving tenure, professors' job performance is less closely monitored, and they become difficult to fire. Tenure thus creates

Accepted Answer

A)  adverse selection. 
B)  a Condorcet paradox. 
C)  a screening problem. 
D)  a moral hazard problem. 
A)  adverse selection. 
B)  a Condorcet paradox. 
C)  a screening problem. 
D)  a moral hazard problem.

Question 15

Some studies show the even students who earned high grades in science classes provide disproven explanations for scientific phenomena. These disproven explanations had been acquired prior to the science classes. These studies provide some support for 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

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.

Question 17

Life insurance companies usually require applicants to have physicals and disclose information on their health. This practice is designed to address

Accepted Answer

A)  a principal-agent problem. 
B)  a moral-hazard problem. 
C)  a problem involving hidden characteristics. 
D)  all of the above are correct. 
A)  a principal-agent problem. 
B)  a moral-hazard problem. 
C)  a problem involving hidden characteristics. 
D)  all of the above are correct.

Question 18

Table 22-22
The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below.
  
-Refer to Table 22-22. If there is a vote between a budget of $12 million and $16 million, the median voter will vote to spend

Accepted Answer

A)  $12 million and the voting outcome will be $12 million. 
B)  $12 million and the voting outcome will be $16 million. 
C)  $16 million and the voting outcome will be $12 million. 
D)  $16 million and the voting outcome will be $16 million. 
A)  $12 million and the voting outcome will be $12 million. 
B)  $12 million and the voting outcome will be $16 million. 
C)  $16 million and the voting outcome will be $12 million. 
D)  $16 million and the voting outcome will be $16 million.

Question 19

Table 22-5
The citizens of Anytown will decide whether to build a new library, a recreation center, or an arena. Exactly one of the three choices will prevail, and the choice will be made by way of pairwise voting, with the majority determining the outcome on each vote. The preferences of the voters are summarized in the table below.
Voter Type
  
-Refer to Table 22-5. If (1) the first vote pits "library" against "arena," and (2) the second vote pits "recreation center" against the winner of the first vote, then the outcome is as follows:

Accepted Answer

A)  "Library" wins the first vote and "library" wins the second vote, so they build a library. 
B)  "Library" wins the first vote and "recreation center" wins the second vote, so they build a recreation center. 
C)  "arena" wins the first vote and "arena" wins the second vote, so they build an arena. 
D)  "arena" wins the first vote and "recreation center" wins the second vote, so they build a recreation center. 
A)  "Library" wins the first vote and "library" wins the second vote, so they build a library. 
B)  "Library" wins the first vote and "recreation center" wins the second vote, so they build a recreation center. 
C)  "arena" wins the first vote and "arena" wins the second vote, so they build an arena. 
D)  "arena" wins the first vote and "recreation center" wins the second vote, so they build a recreation center.

Question 20

The criminal actions of the top managers of corporations such as Enron, Tyco, WorldCom, and Adelphia are an example of moral hazard.

Accepted Answer

A) True 
 B)False

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "unanimity" to mean

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. The median voter is one who prefers to spend

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Kris and Kelly have been dating for several years. Kris loves Kelly very much and wants to marry her. Which of the following is the best way to signal his love to her?

According to the median voter theorem, majority rule will

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

Table 22-20 The table below shows the preferred city budget (in millions) for in the city of Springfield. -Refer to Table 22-20. In an election, each voter will select the budget closest to his or her most preferred budget. In which of the following cases does a budget of $32 win?

When new professors are hired, their job performance is monitored closely. If they meet their institution's standards, they will eventually receive tenure. After receiving tenure, professors' job performance is less closely monitored, and they become difficult to fire. Tenure thus creates

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

Life insurance companies usually require applicants to have physicals and disclose information on their health. This practice is designed to address

The criminal actions of the top managers of corporations such as Enron, Tyco, WorldCom, and Adelphia are an example of moral hazard.

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 his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "unanimity" to mean

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. The median voter is one who prefers to spend

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Kris and Kelly have been dating for several years. Kris loves Kelly very much and wants to marry her. Which of the following is the best way to signal his love to her?

According to the median voter theorem, majority rule will

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

Table 22-20 The table below shows the preferred city budget (in millions) for in the city of Springfield. -Refer to Table 22-20. In an election, each voter will select the budget closest to his or her most preferred budget. In which of the following cases does a budget of $32 win?

When new professors are hired, their job performance is monitored closely. If they meet their institution's standards, they will eventually receive tenure. After receiving tenure, professors' job performance is less closely monitored, and they become difficult to fire. Tenure thus creates

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

Life insurance companies usually require applicants to have physicals and disclose information on their health. This practice is designed to address

The criminal actions of the top managers of corporations such as Enron, Tyco, WorldCom, and Adelphia are an example of moral hazard.

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