Question 1

Which of the following would be an example of a principal trying to deal with a moral hazard problem?

Accepted Answer

A)  The parents of an infant secretly place video cameras in their house before the baby-sitter arrives. 
B)  An insurance company checks police records to determine if its policyholders have received traffic citations. 
C)  An employer examines his workers' output on a daily basis. 
D)  All of the above are correct. 
A)  The parents of an infant secretly place video cameras in their house before the baby-sitter arrives. 
B)  An insurance company checks police records to determine if its policyholders have received traffic citations. 
C)  An employer examines his workers' output on a daily basis. 
D)  All of the above are correct.

Question 2

The problem that arises when one person performs a task on behalf of another person is called the lemons problem.

Accepted Answer

A) True 
 B)False

Question 3

Arrow's impossibility theorem is "disturbing" in the sense that it proves that

Accepted Answer

A)  no voting system is perfect. 
B)  only a dictator can produce a desirable social outcome. 
C)  the preferences of the wealthy should be given more weight than the preferences of the poor. 
D)  the centuries-old Condorcet paradox was not a paradox after all. 
A)  no voting system is perfect. 
B)  only a dictator can produce a desirable social outcome. 
C)  the preferences of the wealthy should be given more weight than the preferences of the poor. 
D)  the centuries-old Condorcet paradox was not a paradox after all.

Question 4

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 5

People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

Accepted Answer

The answer of People with hidden health problems are more...

Question 6

Suppose a community is debating how much money to spend on improvements to the high school. The members of the community who have children advocate spending $20 million to make improvements. The remaining 60% of the community thinks the high school is just fine and does not want to spend anything. What will the outcome be?

Accepted Answer

$0 spent o

Question 7

Table 22-24
The citizens of Mayville are having a severe budget shortage and are faced with eliminating athletics from the town high school. The town administrator has determined that the town can afford to maintain one sport. 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 22-24. Suppose the townspeople vote and choose hockey but the town administrator overrules the vote and chooses football because the town's football team has a chance of winning the state championship. Which of the properties of Arrow's impossibility theorem is violated?

Accepted Answer

The answer of Table 22-24
The citizens of Mayville are having...

Question 8

Which of the following relationships involves asymmetric information?

Accepted Answer

A)  A potential employee knows more about his skills and motivations than potential employers. 
B)  The seller of a used car knows of mechanical problems that aren't easy for the average buyer to observe. 
C)  A real estate agent knows the lowest price a seller is willing to sell her house for, but does not reveal it to people he shows the house. 
D)  All of the above are correct. 
A)  A potential employee knows more about his skills and motivations than potential employers. 
B)  The seller of a used car knows of mechanical problems that aren't easy for the average buyer to observe. 
C)  A real estate agent knows the lowest price a seller is willing to sell her house for, but does not reveal it to people he shows the house. 
D)  All of the above are correct.

Question 9

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 c. 
D)  Plan D is preferred to plan d. 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 c. 
D)  Plan D is preferred to plan d. Plan C is preferred to plan B. Plan B is preferred to plan D.

Question 10

The results of the ultimatum game illustrate the fact that

Accepted Answer

A)  people's behavior is often driven by an innate sense of fairness. 
B)  homo economicus is a good description of people's behavior. 
C)  self-interest brings out the most efficient economic outcome. 
D)  Both b and c are correct. 
A)  people's behavior is often driven by an innate sense of fairness. 
B)  homo economicus is a good description of people's behavior. 
C)  self-interest brings out the most efficient economic outcome. 
D)  Both b and c are correct.

Question 11

Which of the following statements is not correct?

Accepted Answer

A)  The median voter theorem explains why politicians appeal to the middle of the voting distribution. 
B)  Based on studies of human decision making, most people prefer to procrastinate, both in the immediate future and in the distant future. 
C)  Screening refers to an uninformed party trying to extract information from an informed party. 
D)  Advertising can be an example of a company signaling the quality of its products. 
A)  The median voter theorem explains why politicians appeal to the middle of the voting distribution. 
B)  Based on studies of human decision making, most people prefer to procrastinate, both in the immediate future and in the distant future. 
C)  Screening refers to an uninformed party trying to extract information from an informed party. 
D)  Advertising can be an example of a company signaling the quality of its products.

Question 12

Ihaveathousandfriends Social Networking firm had a remarkably profitable year. As a result, its employees expect to receive bonus checks. Which of the following insights into human behavior do the employees exhibit?

Accepted Answer

A)  People are overconfident. 
B)  People care about fairness. 
C)  People are reluctant to change their minds. 
D)  People are inconsistent over time. 
A)  People are overconfident. 
B)  People care about fairness. 
C)  People are reluctant to change their minds. 
D)  People are inconsistent over time.

Question 13

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. 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.

Question 14

Which of the following is a plausible explanation for a firm paying above-equilibrium wages to its workers?

Accepted Answer

A)  It increases the probability that a worker who shirks will be caught. 
B)  It discourages workers from shirking out of fear of losing their high-paying job. 
C)  The Condorcet Paradox suggests that paying high wages will result in greater effort by employees. 
D)  By paying a high wage, employers solve this adverse selection problem and motivate the employees to work harder. 
A)  It increases the probability that a worker who shirks will be caught. 
B)  It discourages workers from shirking out of fear of losing their high-paying job. 
C)  The Condorcet Paradox suggests that paying high wages will result in greater effort by employees. 
D)  By paying a high wage, employers solve this adverse selection problem and motivate the employees to work harder.

Question 15

Studies of human decision-making have found that people do not give enough weight to a small number of vivid observations.

Accepted Answer

A) True 
 B)False

Question 16

If the median voter theorem holds,

Accepted Answer

A)  a Borda count will violate the principle of transitivity. 
B)  the Condorcet paradox also holds. 
C)  minority views will not receive much consideration. 
D)  All of the above are correct. 
A)  a Borda count will violate the principle of transitivity. 
B)  the Condorcet paradox also holds. 
C)  minority views will not receive much consideration. 
D)  All of the above are correct.

Question 17

The majority of Americans, when asked how many states they could name, think they could name all fifty. However, when they are asked to do so, very few are able to come up with all fifty. This is an example of which systematic mistake that people make?

Accepted Answer

People are

Question 18

Economists have found that asymmetric information is not very prevalent.

Accepted Answer

A) True 
 B)False

Question 19

Based on the studies of human decision making, which of the following statements is correct?

Accepted Answer

A)  Most people are not bothered by perceived unfairness as long as they receive some compensation, even if the amount is very small. 
B)  Most people are very willing to change their minds. 
C)  Many people's preferences are inconsistent over time. 
D)  All of the above are correct. 
A)  Most people are not bothered by perceived unfairness as long as they receive some compensation, even if the amount is very small. 
B)  Most people are very willing to change their minds. 
C)  Many people's preferences are inconsistent over time. 
D)  All of the above are correct.

Question 20

The median voter's preferred outcome is the same as the

Accepted Answer

A)  average preferred outcome. 
B)  outcome preferred by the greatest number of voters. 
C)  outcome produced by majority rule. 
D)  outcome preferred by Arrow's "perfect" voter. 
A)  average preferred outcome. 
B)  outcome preferred by the greatest number of voters. 
C)  outcome produced by majority rule. 
D)  outcome preferred by Arrow's "perfect" voter.

Which of the following would be an example of a principal trying to deal with a moral hazard problem?

The problem that arises when one person performs a task on behalf of another person is called the lemons problem.

Arrow's impossibility theorem is "disturbing" in the sense that it proves that

Asymmetric information

People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

Which of the following relationships involves asymmetric information?

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

The results of the ultimatum game illustrate the fact that

Which of the following statements is not correct?

Ihaveathousandfriends Social Networking firm had a remarkably profitable year. As a result, its employees expect to receive bonus checks. Which of the following insights into human behavior do the employees exhibit?

Which of the following is a plausible explanation for a firm paying above-equilibrium wages to its workers?

Studies of human decision-making have found that people do not give enough weight to a small number of vivid observations.

If the median voter theorem holds,

The majority of Americans, when asked how many states they could name, think they could name all fifty. However, when they are asked to do so, very few are able to come up with all fifty. This is an example of which systematic mistake that people make?

Economists have found that asymmetric information is not very prevalent.

Based on the studies of human decision making, which of the following statements is correct?

The median voter's preferred outcome is the same as the

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

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Exam 22: Frontiers of Microeconomics

Which of the following would be an example of a principal trying to deal with a moral hazard problem?

The problem that arises when one person performs a task on behalf of another person is called the lemons problem.

Arrow's impossibility theorem is "disturbing" in the sense that it proves that

Asymmetric information

People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

Which of the following relationships involves asymmetric information?

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

The results of the ultimatum game illustrate the fact that

Which of the following statements is not correct?

Ihaveathousandfriends Social Networking firm had a remarkably profitable year. As a result, its employees expect to receive bonus checks. Which of the following insights into human behavior do the employees exhibit?

Which of the following is a plausible explanation for a firm paying above-equilibrium wages to its workers?

Studies of human decision-making have found that people do not give enough weight to a small number of vivid observations.

If the median voter theorem holds,

The majority of Americans, when asked how many states they could name, think they could name all fifty. However, when they are asked to do so, very few are able to come up with all fifty. This is an example of which systematic mistake that people make?

Economists have found that asymmetric information is not very prevalent.

Based on the studies of human decision making, which of the following statements is correct?

The median voter's preferred outcome is the same as the

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