Question 1

Evidence points to the fact that, in the real world, people appear to care about fairness

Accepted Answer

A)  only when it coincides with their own self-interest. 
B)  only when it coincides with their determination to be consistent over time. 
C)  even when it does not coincide with their own self-interest. 
D)  not at all. 
A)  only when it coincides with their own self-interest. 
B)  only when it coincides with their determination to be consistent over time. 
C)  even when it does not coincide with their own self-interest. 
D)  not at all.

Question 2

Juanita is preparing to study for her economics final exam. She tells her friend that she will be happy if she just gets a B, even though she could likely earn an A if she studied harder. Juanita is what Herbert Simon would call a

Accepted Answer

A)  rational maximizer. 
B)  satisficer. 
C)  homo economicus. 
D)  screener. 
A)  rational maximizer. 
B)  satisficer. 
C)  homo economicus. 
D)  screener.

Question 3

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

Accepted Answer

A) True 
 B)False

Question 4

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Accepted Answer

A)  The firm cares less about profit and more about cost when there are many competitors in the market. 
B)  The firm offers an employee­incentive program in which employees share in the firm's profits. 
C)  The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm. 
D)  The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks. 
A)  The firm cares less about profit and more about cost when there are many competitors in the market. 
B)  The firm offers an employee­incentive program in which employees share in the firm's profits. 
C)  The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm. 
D)  The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.

Question 6

Table 22-14
Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired.
  
-Refer to Table 22-14. Which results for pairwise voting are correct?

Accepted Answer

A)  In a vote between Adams and Campbell, and then a vote between the winner and Brown, Adams wins. 
B)  In a vote between Brown and Campbell, and then a vote between the winner and Adams, Adams wins. 
C)  Both A and B are correct. 
D)  Neither A nor B is correct. 
A)  In a vote between Adams and Campbell, and then a vote between the winner and Brown, Adams wins. 
B)  In a vote between Brown and Campbell, and then a vote between the winner and Adams, Adams wins. 
C)  Both A and B are correct. 
D)  Neither A nor B is correct.

Question 7

The classic example of adverse selection is the market for used cars.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not correct?

Accepted Answer

A)  Pairwise voting never produces transitive preferences. 
B)  The order of pairwise voting can affect the result. 
C)  Majority voting by itself does not tell us what outcome a society really wants. 
D)  No voting system can satisfy all of the following properties: unanimity, transitivity, independence of irrelevant alternatives, and no dictators. 
A)  Pairwise voting never produces transitive preferences. 
B)  The order of pairwise voting can affect the result. 
C)  Majority voting by itself does not tell us what outcome a society really wants. 
D)  No voting system can satisfy all of the following properties: unanimity, transitivity, independence of irrelevant alternatives, and no dictators.

Question 9

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 10

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Accepted Answer

A) True 
 B)False

Question 11

Table 22-10
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 22-10. If the town administrator asks voters to choose first between reducing police patrols and increasing taxes, and then between the winner of the first vote and cutting the school arts budget, and then between the winner of the second vote and turning off half of the streetlights, which choice will win the final vote?

Accepted Answer

A)  arts 
B)  police 
C)  streetlights 
D)  taxes 
A)  arts 
B)  police 
C)  streetlights 
D)  taxes

Question 12

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. Explain why the Condorcet paradox applies to this voting situation.

Accepted Answer

The majority rule do

Question 13

Explain the Condorcet paradox. To which type of voting system does it apply?

Accepted Answer

The Condorcet paradox applies directly t

Question 14

Scenario 22-1
Esteban and Michaela own an apartment building. They hire Nico to manage the building and deal with tenants' complaints. They also hire Ted to make any necessary repairs to the apartments or the common area and they hire Rex to be the door guard at night.
-Refer to Scenario 22-1. Which of the following statements is correct?

Accepted Answer

A)  If Rex falls asleep while he is supposed to be guarding the door, he has created an adverse selection problem. 
B)  Esteban and Michaela are the principals and Nico, Ted, and Rex are the agents. 
C)  Nico is the principal and Ted and Rex are the agents. 
D)  All of the above are correct. 
A)  If Rex falls asleep while he is supposed to be guarding the door, he has created an adverse selection problem. 
B)  Esteban and Michaela are the principals and Nico, Ted, and Rex are the agents. 
C)  Nico is the principal and Ted and Rex are the agents. 
D)  All of the above are correct.

Question 15

People tend to wait until deadlines get close to work on projects in part because they believe that they can complete the projects in less time than it will actually take. Which findings from behavioral economics is this observation consistent with?

Accepted Answer

A)  People tend to be time inconsistent and people tend to be overconfident. 
B)  People tend to be time inconsistent but not that people tend to be overconfident. 
C)  People tend to be overconfident, but not that people tend to be time inconsistent. 
D)  Neither that people tend to be overconfident nor that people tend to be time inconsistent. 
A)  People tend to be time inconsistent and people tend to be overconfident. 
B)  People tend to be time inconsistent but not that people tend to be overconfident. 
C)  People tend to be overconfident, but not that people tend to be time inconsistent. 
D)  Neither that people tend to be overconfident nor that people tend to be time inconsistent.

Question 16

Table 22-4
The fortunate residents of Anytown have a budget surplus. The mayor decided that it is only fair to have the residents vote on what to do with the surplus. The mayor has narrowed the options down to three possible projects: a playground, a library, or a swimming pool. The voters fall into three categories and have preferences as illustrated in the table.
  
-Refer to Table 22-4. If the mayor decides to use a Borda count rather than pairwise voting,

Accepted Answer

A)  the swimming pool will win. 
B)  the library will win. 
C)  the playground will win. 
D)  the results will be the same as with pairwise voting. 
A)  the swimming pool will win. 
B)  the library will win. 
C)  the playground will win. 
D)  the results will be the same as with pairwise voting.

Question 17

Which of the following statements is correct?

Accepted Answer

A)  Based on studies of human decision making, most people are overconfident in their own abilities. 
B)  Arrow's impossibility theorem disproves the median voter theorem. 
C)  Romantic gifts are an example of adverse selection. 
D)  An efficiency wage encourages workers to shirk. 
A)  Based on studies of human decision making, most people are overconfident in their own abilities. 
B)  Arrow's impossibility theorem disproves the median voter theorem. 
C)  Romantic gifts are an example of adverse selection. 
D)  An efficiency wage encourages workers to shirk.

Question 18

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. Maria recommends using a vote by majority rule and proposes first choosing between spaghetti and lasagne, then choosing between the winner of the first vote and ravioli, and finally choosing between the winner of the second vote and pizza. If everyone votes according to his or her preferences,

Accepted Answer

A)  the winner of the first vote will be spaghetti, the winner of the second vote will be ravioli, and the winner of the final vote will be ravioli. 
B)  the winner of the first vote will be spaghetti, the winner of the second vote will be spaghetti, and the winner of the final vote will be spaghetti. 
C)  the winner of the first vote will be lasagne, the winner of the second vote will be ravioli, and the winner of the final vote will be ravioli. 
D)  the winner of the first vote will be lasagne, the winner of the second vote will be lasagne, and the winner of the final vote will be ravioli. 
A)  the winner of the first vote will be spaghetti, the winner of the second vote will be ravioli, and the winner of the final vote will be ravioli. 
B)  the winner of the first vote will be spaghetti, the winner of the second vote will be spaghetti, and the winner of the final vote will be spaghetti. 
C)  the winner of the first vote will be lasagne, the winner of the second vote will be ravioli, and the winner of the final vote will be ravioli. 
D)  the winner of the first vote will be lasagne, the winner of the second vote will be lasagne, and the winner of the final vote will be ravioli.

Question 19

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 modified Borda count system where each person's first choice receives 10 points, second choice 5 points, third choice 3 points and fourth choice 1 point, the result would be that

Accepted Answer

A)  A would win. 
B)  B would win. 
C)  C would win. 
D)  D would win. 
A)  A would win. 
B)  B would win. 
C)  C would win. 
D)  D would win.

Question 20

Which of the following is an example of screening?

Accepted Answer

A)  A lender checks a loan applicants credit history. 
B)  When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C)  When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not. 
D)  All of the above are correct. 
A)  A lender checks a loan applicants credit history. 
B)  When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C)  When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not. 
D)  All of the above are correct.

Evidence points to the fact that, in the real world, people appear to care about fairness

Juanita is preparing to study for her economics final exam. She tells her friend that she will be happy if she just gets a B, even though she could likely earn an A if she studied harder. Juanita is what Herbert Simon would call a

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. -Refer to Table 22-14. Which results for pairwise voting are correct?

The classic example of adverse selection is the market for used cars.

Which of the following is not correct?

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

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Explain the Condorcet paradox. To which type of voting system does it apply?

People tend to wait until deadlines get close to work on projects in part because they believe that they can complete the projects in less time than it will actually take. Which findings from behavioral economics is this observation consistent with?

Which of the following statements is correct?

Which of the following is an example of screening?

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

Evidence points to the fact that, in the real world, people appear to care about fairness

Juanita is preparing to study for her economics final exam. She tells her friend that she will be happy if she just gets a B, even though she could likely earn an A if she studied harder. Juanita is what Herbert Simon would call a

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. -Refer to Table 22-14. Which results for pairwise voting are correct?

The classic example of adverse selection is the market for used cars.

Which of the following is not correct?

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

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Explain the Condorcet paradox. To which type of voting system does it apply?

People tend to wait until deadlines get close to work on projects in part because they believe that they can complete the projects in less time than it will actually take. Which findings from behavioral economics is this observation consistent with?

Which of the following statements is correct?

Which of the following is an example of screening?

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