Question 1

The field of behavioral economics applies the methods of economics to study how government works.

Accepted Answer

A) True 
 B)False

Question 2

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Accepted Answer

A) True 
 B)False

Question 3

Table 22-15
Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below.
  
-Refer to Table 22-15. If elections were held where voters choose either Fred or Mary, and then choose either the winner or Beth, what would the results be?

Accepted Answer

A)  Fred would win the first and second elections. 
B)  Fred would win the first election and Beth would win the second election. 
C)  Mary would win the first and second elections. 
D)  Mary would win the first election and Beth would win the second election. 
A)  Fred would win the first and second elections. 
B)  Fred would win the first election and Beth would win the second election. 
C)  Mary would win the first and second elections. 
D)  Mary would win the first election and Beth would win the second election.

Question 4

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget. Which of the following statements is true?

Accepted Answer

A)  The Condorcet Paradox predicts that the $100 budget will win even though fewer people prefer that budget. 
B)  The median voter theorem predicts that the winning budget will be $125, the median of the preferences of the two types of voters. 
C)  Arrow's impossibility theorem says that the winning budget cannot be determined in this election since there is no unanimity. 
D)  None of the above. 
A)  The Condorcet Paradox predicts that the $100 budget will win even though fewer people prefer that budget. 
B)  The median voter theorem predicts that the winning budget will be $125, the median of the preferences of the two types of voters. 
C)  Arrow's impossibility theorem says that the winning budget cannot be determined in this election since there is no unanimity. 
D)  None of the above.

Question 5

Table 22-15
Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below.
  
-Refer to Table 22-15. Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting by Henry, Diane, and Linda?

Accepted Answer

A)  The paradox implies that pairwise voting never produces transitive preferences, and so the voting by Henry, Diane, and Linda fails to produce transitive preferences. 
B)  The paradox implies that pairwise voting sometimes (but not always) produces transitive preferences, and the voting by Henry, Diane, and Linda does produce transitive preferences. 
C)  The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting by Henry, Diane, and Linda fails to produce transitive preferences. 
D)  The paradox does not apply to the case at hand, because Henry's preferences are not individually transitive. 
A)  The paradox implies that pairwise voting never produces transitive preferences, and so the voting by Henry, Diane, and Linda fails to produce transitive preferences. 
B)  The paradox implies that pairwise voting sometimes (but not always) produces transitive preferences, and the voting by Henry, Diane, and Linda does produce transitive preferences. 
C)  The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting by Henry, Diane, and Linda fails to produce transitive preferences. 
D)  The paradox does not apply to the case at hand, because Henry's preferences are not individually transitive.

Question 6

A safe driver would likely choose an auto insurance policy with a

Accepted Answer

A)  low premium and a high deductible. 
B)  high premium and a high deductible. 
C)  high premium and a low deductible. 
D)  high premium and no deductible. 
A)  low premium and a high deductible. 
B)  high premium and a high deductible. 
C)  high premium and a low deductible. 
D)  high premium and no deductible.

Question 7

Assume there are nine voters in a certain small town and let x = the preferred number of dollars spent per person per month on garbage collection. For Voters 1, 2 3, and 4, x = $10; for Voter 5, x = $15; for Voter , x = $18; and for Voters 6, 7, 8 and 9, x = $20. The median voter is

Accepted Answer

A)  Voter 3. 
B)  Voter 4. 
C)  Voter 5. 
D)  Voter 6. 
A)  Voter 3. 
B)  Voter 4. 
C)  Voter 5. 
D)  Voter 6.

Question 8

Table 22-7
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 Table 22-7. Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting on how to improve the safety of the intersection?

Accepted Answer

A)  The paradox implies that pairwise voting never produces transitive preferences, and so the voting in the town fails to produce transitive preferences. 
B)  The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, but the voting in the town does produce transitive preferences. 
C)  The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting in the town fails to produce transitive preferences. 
D)  The paradox implies that pairwise voting always produces transitive preferences, and so the voting in the town produces transitive preferences. 
A)  The paradox implies that pairwise voting never produces transitive preferences, and so the voting in the town fails to produce transitive preferences. 
B)  The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, but the voting in the town does produce transitive preferences. 
C)  The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences, and the voting in the town fails to produce transitive preferences. 
D)  The paradox implies that pairwise voting always produces transitive preferences, and so the voting in the town produces transitive preferences.

Question 9

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 10

Rick goes to work 8 hours per day, but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams. This is an example of

Accepted Answer

A)  the Condorcet Paradox. 
B)  signaling. 
C)  moral hazard. 
D)  screening. 
A)  the Condorcet Paradox. 
B)  signaling. 
C)  moral hazard. 
D)  screening.

Question 11

Scott's Painting Company paints houses. Since Scott's business does not have the name recognition of some of the bigger painting companies, Scott advertises a "Five-Year Money Back Guarantee" to indicate to buyers that his service is of high quality. This guarantee is an example of

Accepted Answer

A)  screening. 
B)  signaling. 
C)  the seller's curse. 
D)  the principal-agent problem. 
A)  screening. 
B)  signaling. 
C)  the seller's curse. 
D)  the principal-agent problem.

Question 12

Don is convinced that it would be best if the U.S. was on a gold standard. He enthusiastically reads any editorials or articles that confirm his view. He frequently dismisses editorials and articles that argue against the gold standard because he presumes they are flawed or written by "crackpots." Don's behavior 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 13

The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

Accepted Answer

A) True 
 B)False

Question 14

Table 22-13
A high school Spanish class and their teacher are planning to take a Spring Break trip abroad but they have to decide where to go. They have narrowed the options to: Spain, Mexico, Ecuador, and Costa Rica. The voters' preferences are shown in the table below.
  
-Refer to Table 22-13. In a pairwise election between Mexico and Spain and then a second election between the winner and Costa Rica, which countries are chosen?

Accepted Answer

A)  Mexico is chosen in the first and second elections. 
B)  Mexico is chosen in the first election and Costa Rica is chosen in the second. 
C)  Spain is chosen in the first and second elections. 
D)  Spain is chosen in the first election and Costa Rica is chosen in the second. 
A)  Mexico is chosen in the first and second elections. 
B)  Mexico is chosen in the first election and Costa Rica is chosen in the second. 
C)  Spain is chosen in the first and second elections. 
D)  Spain is chosen in the first election and Costa Rica is chosen in the second.

Question 15

Refer to Narrative 22-1. Which of the ladies is an agent?

Accepted Answer

A)  Shana 
B)  Katie 
C)  Belinda 
D)  Magda 
A)  Shana 
B)  Katie 
C)  Belinda 
D)  Magda

Question 16

Table 22-16
The Johnson family is planning a vacation and, though Mr. and Mrs. Johnson will be paying for the trip, they have decided to use a democratic voting process to choose their destination. The family members' preferences are reflected in the table below.
  
-Refer to Table 22-16. If Mr. Johnson wants to ensure that his 1st choice becomes the family's winning destination, he should propose

Accepted Answer

A)  using a vote by majority rule and first choosing between Opryland and the Grand Canyon, then choosing between the winner of the first vote and Sea World, and finally choosing between the winner of the second vote and Disneyland. 
B)  using a vote by majority rule and first choosing between Disneyland and Sea World, then choosing between the winner of the first vote and the Grand Canyon and finally choosing between the winner of the second vote and the Opryland. 
C)  using a vote by majority rule and first choosing between Sea World and the Grand Canyon, then choosing between the winner of the first vote and Disneyland, and finally choosing between the winner of the second vote and Opryland. 
D)  using a Borda count. 
A)  using a vote by majority rule and first choosing between Opryland and the Grand Canyon, then choosing between the winner of the first vote and Sea World, and finally choosing between the winner of the second vote and Disneyland. 
B)  using a vote by majority rule and first choosing between Disneyland and Sea World, then choosing between the winner of the first vote and the Grand Canyon and finally choosing between the winner of the second vote and the Opryland. 
C)  using a vote by majority rule and first choosing between Sea World and the Grand Canyon, then choosing between the winner of the first vote and Disneyland, and finally choosing between the winner of the second vote and Opryland. 
D)  using a Borda count.

Question 17

In a dictator game, player A must divide $100 between player A and player B. In this game, player B does not have the opportunity to reject an offer - he or she goes home with whatever player A offers. Experiments have observed that when player A splits the $100, he or she consistently offers over $10 to player B. Which of the following comments fits best.

Accepted Answer

A)  Although player A is acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
B)  Although player A is acting as economic theory usually assumes, he or she makes such offers although they are not fair. 
C)  Although player A is not acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
D)  Although player A is not acting as economic theory usually assumes, he or she makes such offers because they are not fair. 
A)  Although player A is acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
B)  Although player A is acting as economic theory usually assumes, he or she makes such offers although they are not fair. 
C)  Although player A is not acting as economic theory usually assumes, he or she makes such offers because they seem more fair. 
D)  Although player A is not acting as economic theory usually assumes, he or she makes such offers because they are not fair.

Question 18

Which of the following statements is correct?

Accepted Answer

A)  Hidden actions and hidden characteristics are both associated with the moral-hazard problem. 
B)  Hidden actions and hidden characteristics are both associated with the adverse-selection problem. 
C)  Hidden actions are associated with the moral-hazard problem, whereas hidden characteristics are associated with the adverse-selection problem. 
D)  Hidden actions are associated with the adverse-selection problem, whereas hidden characteristics are associated with the moral-hazard problem. 
A)  Hidden actions and hidden characteristics are both associated with the moral-hazard problem. 
B)  Hidden actions and hidden characteristics are both associated with the adverse-selection problem. 
C)  Hidden actions are associated with the moral-hazard problem, whereas hidden characteristics are associated with the adverse-selection problem. 
D)  Hidden actions are associated with the adverse-selection problem, whereas hidden characteristics are associated with the moral-hazard problem.

Question 19

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

Accepted Answer

The median voter theorem implies that po

Question 20

Refer to Narrative 22-1. Which of the ladies is a principal?

Accepted Answer

A)  Shana 
B)  Katie 
C)  Belinda 
D)  Magda 
A)  Shana 
B)  Katie 
C)  Belinda 
D)  Magda

The field of behavioral economics applies the methods of economics to study how government works.

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget. Which of the following statements is true?

A safe driver would likely choose an auto insurance policy with a

Assume there are nine voters in a certain small town and let x = the preferred number of dollars spent per person per month on garbage collection. For Voters 1, 2 3, and 4, x = $10; for Voter 5, x = $15; for Voter , x = $18; and for Voters 6, 7, 8 and 9, x = $20. The median voter is

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

Rick goes to work 8 hours per day, but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams. This is an example of

Scott's Painting Company paints houses. Since Scott's business does not have the name recognition of some of the bigger painting companies, Scott advertises a "Five-Year Money Back Guarantee" to indicate to buyers that his service is of high quality. This guarantee is an example of

The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

Refer to Narrative 22-1. Which of the ladies is an agent?

Which of the following statements is correct?

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

Refer to Narrative 22-1. Which of the ladies is a principal?

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

The field of behavioral economics applies the methods of economics to study how government works.

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget. Which of the following statements is true?

A safe driver would likely choose an auto insurance policy with a

Assume there are nine voters in a certain small town and let x = the preferred number of dollars spent per person per month on garbage collection. For Voters 1, 2 3, and 4, x = $10; for Voter 5, x = $15; for Voter , x = $18; and for Voters 6, 7, 8 and 9, x = $20. The median voter is

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

Rick goes to work 8 hours per day, but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams. This is an example of

Scott's Painting Company paints houses. Since Scott's business does not have the name recognition of some of the bigger painting companies, Scott advertises a "Five-Year Money Back Guarantee" to indicate to buyers that his service is of high quality. This guarantee is an example of

The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

Refer to Narrative 22-1. Which of the ladies is an agent?

Which of the following statements is correct?

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

Refer to Narrative 22-1. Which of the ladies is a principal?

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