Question 1

In economics, a difference in access to relevant knowledge is called a behavioral asymmetry.

Accepted Answer

A) True 
 B)False

Question 2

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

Accepted Answer

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

Question 3

Which of the following is an example of an adverse selection problem?

Accepted Answer

A)  A customer purchases four apples, two of which are bruised. 
B)  A card shop puts its Halloween merchandise on sale on November 1st. 
C)  A young job applicant fails to reveal that she was fired from her last job because she was incompetent. 
D)  A man rents a car and then drives it less carefully and fills it with cheaper gas than he would if he owned it. 
A)  A customer purchases four apples, two of which are bruised. 
B)  A card shop puts its Halloween merchandise on sale on November 1st. 
C)  A young job applicant fails to reveal that she was fired from her last job because she was incompetent. 
D)  A man rents a car and then drives it less carefully and fills it with cheaper gas than he would if he owned it.

Question 4

"Signaling" refers to actions by an informed party for the sole purpose of

Accepted Answer

A)  telling another party that the signaler has information to reveal, without actually revealing that information. 
B)  conveying false information. 
C)  induce employees to put in the effort they are capable of. 
D)  credibly revealing private information. 
A)  telling another party that the signaler has information to reveal, without actually revealing that information. 
B)  conveying false information. 
C)  induce employees to put in the effort they are capable of. 
D)  credibly revealing private information.

Question 5

Which of the following frontier fields of economics identifies that people do not always act rationally?

Accepted Answer

A)  asymmetric information 
B)  political economy 
C)  behavioral economics 
D)  existential economics 
A)  asymmetric information 
B)  political economy 
C)  behavioral economics 
D)  existential economics

Question 6

Students of microeconomic principles often say they are going to study "tonight," because the only way to pass the exam is to study some every night. When "tonight" comes, some students choose to do something else. Come exam day, these students do not do well on their exam. This observation is an example of how people

Accepted Answer

A)  are inconsistent over time. 
B)  are consistent over time. 
C)  are mainly interested in fairness. 
D)  are rational. 
A)  are inconsistent over time. 
B)  are consistent over time. 
C)  are mainly interested in fairness. 
D)  are rational.

Question 7

Which of the following relationships involves asymmetric information?

Accepted Answer

A)  A recruiter for a college football team evaluates the performance of a high-school player. 
B)  A loan applicant knows more about the likelihood her business will be successful than the loan officer. 
C)  Someone considering buying running shoes looks at a number of online reviews by buyers. 
D)  All of the above are correct. 
A)  A recruiter for a college football team evaluates the performance of a high-school player. 
B)  A loan applicant knows more about the likelihood her business will be successful than the loan officer. 
C)  Someone considering buying running shoes looks at a number of online reviews by buyers. 
D)  All of the above are correct.

Question 8

Valerie prefers A to B and she prefers B to C. If Valerie's preferences are transitive, then she prefers A to C.

Accepted Answer

A) True 
 B)False

Question 9

Economists use basic psychological insights in the field of study called

Accepted Answer

A)  psychological economics. 
B)  transitional economics. 
C)  behavioral economics. 
D)  social economics. 
A)  psychological economics. 
B)  transitional economics. 
C)  behavioral economics. 
D)  social economics.

Question 10

The Condorcet paradox

Accepted Answer

A)  proved that the Arrow impossibility theorem is wrong. 
B)  was proved wrong by the Arrow impossibility theorem. 
C)  serves as an example of the Arrow impossibility theorem. 
D)  pertains to voting systems, whereas Arrow's Impossibility Theorem does not. 
A)  proved that the Arrow impossibility theorem is wrong. 
B)  was proved wrong by the Arrow impossibility theorem. 
C)  serves as an example of the Arrow impossibility theorem. 
D)  pertains to voting systems, whereas Arrow's Impossibility Theorem does not.

Question 11

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. Mr. Johnson recommends using a vote by majority rule. If he wants to ensure that his 1st choice becomes the family's winning destination, he should propose

Accepted Answer

A)  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)  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)  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)  first choosing between Opryland and Disneyland, then choosing between the winner of the first vote and the Grand Canyon, and finally choosing between the winner of the second vote and Sea World. 
A)  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)  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)  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)  first choosing between Opryland and Disneyland, then choosing between the winner of the first vote and the Grand Canyon, and finally choosing between the winner of the second vote and Sea World.

Question 12

Herbert Simon, one of the first social scientists to combine the study of economics and psychology, suggested that humans should be viewed as

Accepted Answer

A)  rational maximizers. 
B)  satisficers. 
C)  independent thinkers. 
D)  signalers. 
A)  rational maximizers. 
B)  satisficers. 
C)  independent thinkers. 
D)  signalers.

Question 13

If the seller of a used car offers a limited warranty, the warranty is an example of a(n)

Accepted Answer

A)  signal. 
B)  screen. 
C)  efficiency wage. 
D)  agent. 
A)  signal. 
B)  screen. 
C)  efficiency wage. 
D)  agent.

Question 14

Which of the following is an example of informational asymmetry?

Accepted Answer

A)  A seller of a house knows more about its true condition than does a potential buyer. 
B)  A salesperson knows more about her efforts than does her manager. 
C)  A child knows more about how much time he spent playing video games while he was alone in his bedroom than do his parents. 
D)  All of the above are correct. 
A)  A seller of a house knows more about its true condition than does a potential buyer. 
B)  A salesperson knows more about her efforts than does her manager. 
C)  A child knows more about how much time he spent playing video games while he was alone in his bedroom than do his parents. 
D)  All of the above are correct.

Question 15

Which of the following events best exemplifies the concept of signaling?

Accepted Answer

A)  A college student's parents, having learned that their child is short of money, send her a check for $1,000. 
B)  A new company making high quality bicycles at a reasonable price sends free bikes to reviewers working for bicycle magazines. 
C)  A grocery store maintains a policy of examining the driver's license of everyone who writes a personal check to purchase his groceries. 
D)  A university maintains a policy of considering for admission only those students who graduated among the top ten percent of their high school class. 
A)  A college student's parents, having learned that their child is short of money, send her a check for $1,000. 
B)  A new company making high quality bicycles at a reasonable price sends free bikes to reviewers working for bicycle magazines. 
C)  A grocery store maintains a policy of examining the driver's license of everyone who writes a personal check to purchase his groceries. 
D)  A university maintains a policy of considering for admission only those students who graduated among the top ten percent of their high school class.

Question 16

Domingo is a contestant on a trivia quiz show. For every state capital he can correctly identify, he will win $1,000. However, before identifying any capitals, he must decide how many he thinks he can correctly identify. If he cannot identify as many as he has wagered, Domingo will not win any money. Suppose Domingo says that he can correctly identify 42 state capitals for a potential payoff of $42,000. According to studies of human decision-making, what is most likely to happen?

Accepted Answer

A)  Domingo will be able to identify 42 state capitals and he will win $42,000. 
B)  Domingo will be able to identify fewer than 42 state capitals and will not win any money. 
C)  Domingo will not be able to identify any state capitals and will not win any money. 
D)  Domingo will choose to save all of the money he wins on the quiz show for his retirement. 
A)  Domingo will be able to identify 42 state capitals and he will win $42,000. 
B)  Domingo will be able to identify fewer than 42 state capitals and will not win any money. 
C)  Domingo will not be able to identify any state capitals and will not win any money. 
D)  Domingo will choose to save all of the money he wins on the quiz show for his retirement.

Question 17

Which of the following is not an example of an adverse selection problem?

Accepted Answer

A)  A homeowner purchases a refrigerator that the seller knows has a history of leaking. 
B)  A highly productive worker quits her job after a salary cut knowing that she can make more at a different job. 
C)  A major league baseball player performs poorly in his second season after signing a multi-million dollar contract. 
D)  A contractor uses low quality materials for construction but charges for higher quality materials. 
A)  A homeowner purchases a refrigerator that the seller knows has a history of leaking. 
B)  A highly productive worker quits her job after a salary cut knowing that she can make more at a different job. 
C)  A major league baseball player performs poorly in his second season after signing a multi-million dollar contract. 
D)  A contractor uses low quality materials for construction but charges for higher quality materials.

Question 18

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

Accepted Answer

A)  principal-agent problem. 
B)  moral-hazard problem. 
C)  adverse-selection problem. 
D)  signaling problem. 
A)  principal-agent problem. 
B)  moral-hazard problem. 
C)  adverse-selection problem. 
D)  signaling problem.

Question 19

Which of the following is an example of satisficing behavior?

Accepted Answer

A)  You continue studying for your economics exam until you believe you'll get a score that's good enough. 
B)  You spend time looking over the lettuce at the grocery store in order to make sure you get the best head of lettuce. 
C)  You clean your room to the point where you think it's clean enough that further time can be used for more productive purposes. 
D)  You carefully plan your day in order to get "the most out of life." 
A)  You continue studying for your economics exam until you believe you'll get a score that's good enough. 
B)  You spend time looking over the lettuce at the grocery store in order to make sure you get the best head of lettuce. 
C)  You clean your room to the point where you think it's clean enough that further time can be used for more productive purposes. 
D)  You carefully plan your day in order to get "the most out of life."

Question 20

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. Mr. Johnson recommends using a vote by majority rule and proposes 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. If everyone votes according to their preferences,

Accepted Answer

A)  the winner of the first vote will be Opryland, the winner of the second vote will be Sea World, and the winner of the final vote will be Disneyland. 
B)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon, and the winner of the final vote will be Disneyland. 
C)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Sea World, and the winner of the final vote will be Disneyland. 
D)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon, and the winner of the final vote will be Grand Canyon. 
A)  the winner of the first vote will be Opryland, the winner of the second vote will be Sea World, and the winner of the final vote will be Disneyland. 
B)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon, and the winner of the final vote will be Disneyland. 
C)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Sea World, and the winner of the final vote will be Disneyland. 
D)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon, and the winner of the final vote will be Grand Canyon.

In economics, a difference in access to relevant knowledge is called a behavioral asymmetry.

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

Which of the following is an example of an adverse selection problem?

"Signaling" refers to actions by an informed party for the sole purpose of

Which of the following frontier fields of economics identifies that people do not always act rationally?

Which of the following relationships involves asymmetric information?

Valerie prefers A to B and she prefers B to C. If Valerie's preferences are transitive, then she prefers A to C.

Economists use basic psychological insights in the field of study called

The Condorcet paradox

Herbert Simon, one of the first social scientists to combine the study of economics and psychology, suggested that humans should be viewed as

If the seller of a used car offers a limited warranty, the warranty is an example of a(n)

Which of the following is an example of informational asymmetry?

Which of the following events best exemplifies the concept of signaling?

Which of the following is not an example of an adverse selection problem?

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

Which of the following is an example of satisficing behavior?

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 economics, a difference in access to relevant knowledge is called a behavioral asymmetry.

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

Which of the following is an example of an adverse selection problem?

"Signaling" refers to actions by an informed party for the sole purpose of

Which of the following frontier fields of economics identifies that people do not always act rationally?

Which of the following relationships involves asymmetric information?

Valerie prefers A to B and she prefers B to C. If Valerie's preferences are transitive, then she prefers A to C.

Economists use basic psychological insights in the field of study called

The Condorcet paradox

Herbert Simon, one of the first social scientists to combine the study of economics and psychology, suggested that humans should be viewed as

If the seller of a used car offers a limited warranty, the warranty is an example of a(n)

Which of the following is an example of informational asymmetry?

Which of the following events best exemplifies the concept of signaling?

Which of the following is not an example of an adverse selection problem?

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

Which of the following is an example of satisficing behavior?

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