Question 1

Political leaders are always aiming for an optimal combination of efficiency and equality.

Accepted Answer

A) True 
 B)False

Question 2

The mathematical result showing that, under certain assumptions, there is no scheme for aggregating individual preferences into a valid set of social preferences is called

Accepted Answer

Arrow's im

Question 3

A street vendor sells a replica of a pair of designer shoes to a young woman who believes the shoes are authentic. The street vendor is engaging in

Accepted Answer

A)  both moral hazard and adverse selection. 
B)  neither moral hazard nor adverse selection. 
C)  moral hazard, but not adverse selection. 
D)  adverse selection, but not moral hazard. 
A)  both moral hazard and adverse selection. 
B)  neither moral hazard nor adverse selection. 
C)  moral hazard, but not adverse selection. 
D)  adverse selection, but not moral hazard.

Question 4

Studies of human decision making reveal several systematic mistakes people make. Which of the following is not an example of one of these mistakes?

Accepted Answer

A)  Tom tells everyone he's sure he can run a 5K in twenty­five minutes, but then tries a couple of times and takes over thirty minutes. 
B)  Kate hears a news report about five people dying from a tornado in Kansas and decides to cancel her plans to visit her aunt there. 
C)  Randi is a strong proponent of raising the minimum wage. She reads a research report on the effects of increasing the minimum wage and begins to doubt her previous thinking. 
D)  Jenny is shopping for a new car and has found that Hondota cars consistently get high quality ratings. Her friend had trouble with her Hondota, so Jenny decides not to purchase a Hondota. 
A)  Tom tells everyone he's sure he can run a 5K in twenty­five minutes, but then tries a couple of times and takes over thirty minutes. 
B)  Kate hears a news report about five people dying from a tornado in Kansas and decides to cancel her plans to visit her aunt there. 
C)  Randi is a strong proponent of raising the minimum wage. She reads a research report on the effects of increasing the minimum wage and begins to doubt her previous thinking. 
D)  Jenny is shopping for a new car and has found that Hondota cars consistently get high quality ratings. Her friend had trouble with her Hondota, so Jenny decides not to purchase a Hondota.

Question 5

Economic experiments show that people care more about winning a game than about its intrinsic fairness.

Accepted Answer

A) True 
 B)False

Question 6

Assume there are 4065 voters in a certain small town and let x = the preferred number of dollars charged monthly to support local parks. For Voters 1-1050, x = $10; for voters 1051-2121, x= $20, for voters 2122-3334, x = $30; for voters 3335-3998, x = $40; and for 3999-4065, x = $50. Based on these preferences, which of the dollar amounts will win over any of the others?

Accepted Answer

A)  $20. 
B)  $30. 
C)  $50. 
D)  None of the above are correct. 
A)  $20. 
B)  $30. 
C)  $50. 
D)  None of the above are correct.

Question 7

Table 22-18
The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences.
  
-Refer to Table 22-18. Suppose before any voting takes place that alternative W is eliminated as an option. If the voters first choose between alternatives X and Y in a majority vote, with the winner of that vote going against option Z in a majority vote, which alternative would win?

Accepted Answer

A)  X 
B)  Y 
C)  Z 
D)  There would be no clear winner - alternatives X and Y would tie. 
A)  X 
B)  Y 
C)  Z 
D)  There would be no clear winner - alternatives X and Y would tie.

Question 8

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 the citizens of Anytown use a Borda count, rather than pairwise majority voting, to decide what to build, then they will build a new

Accepted Answer

A)  library. 
B)  recreation center. 
C)  arena. 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance. 
A)  library. 
B)  recreation center. 
C)  arena. 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance.

Question 9

A "satisficer" is a person whose decision making is the same as that predicted by mainstream economic models.

Accepted Answer

A) True 
 B)False

Question 10

What is the name of the mathematical result showing that no voting system can simultaneously satisfy the properties of unanimity, transitivity, independence of irrelevant alternatives, and no dictators?

Accepted Answer

A)  The fundamental theorem of behavioral economics 
B)  Arrow's impossibility theorem 
C)  The fundamental theorem of voting 
D)  The median voter theorem 
A)  The fundamental theorem of behavioral economics 
B)  Arrow's impossibility theorem 
C)  The fundamental theorem of voting 
D)  The median voter theorem

Question 11

Based on studies of human decision making, many people care more about the fairness of a game than about their personal winnings.

Accepted Answer

A) True 
 B)False

Question 12

Suppose that an economics professor selects two students, Audrey and Michael, to participate in a classroom experiment. The professor gives Audrey twenty $1 bills. Audrey must pick an allocation of the twenty $1 bills to offer to Michael. If Michael accepts the allocation, each student keeps his or her portion of the money. If Michael rejects the allocation, the professor keeps the $20, and each student receives nothing. Audrey selects $19 for herself and $1 for Michael. Based on the studies of human decision making, which of the following statements is correct?

Accepted Answer

A)  If Michael accepts the offer, he is behaving rationally. 
B)  If Michael rejects the offer, he may value fairness more than $1. 
C)  If Michael rejects the offer, Audrey made a bad choice by trying to keep $19 for herself. 
D)  Any of the above could be correct. 
A)  If Michael accepts the offer, he is behaving rationally. 
B)  If Michael rejects the offer, he may value fairness more than $1. 
C)  If Michael rejects the offer, Audrey made a bad choice by trying to keep $19 for herself. 
D)  Any of the above could be correct.

Question 13

Table 22-12
The following table shows the preferences for the five voters in a city regarding how to deal with the city's diseased trees.
   A = do nothing
B = follow the expert's advice to remove every tree
C = remove every 4th tree now and perhaps more later D = use an untested spraying alternative
-Refer to Table 22-12. Consider the public policy for dealing with the diseased trees. Using a Borda count with 4 points assigned to the first choice, 3 points assigned to the second choice, 2 points assigned to the third choice, and 1 point assigned to the fourth choice, which policy wins?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 14

Scenario 22-6
Shana owns a boutique that sells high­end women's clothing and accessories. Katie works part-time at the boutique and frequently is the only employee in this small store. Shana pays Katie a wage that is higher than the market wage for this type of job. When the store is not full of customers, Katie diligently works on displays and cleans to keep the store looking its best. Belinda is a customer in the store who asks Katie's opinion on the quality of some jeans she is considering purchasing. Katie tells her the quality is great even though she's had several other customers return them due to flaws. Magda is another customer who is returning a necklace without volunteering that a gem is missing.
-Refer to Scenario 22-6. Why do you suppose Shana pays Katie a wage higher than the market wage?

Accepted Answer

to avoid a

Question 15

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. If the town administrator asks voters to choose first between hockey and basketball and then between the winner of the first vote and football, which sport will win the final vote?

Accepted Answer

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

Question 16

Which of the following is an example of asymmetric information?

Accepted Answer

A)  When someone is applying for a job, the employer checks references to determine the previous work habits of the applicant. 
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 potential buyer requests documentation of the repair history of the car. 
D)  All of the above are correct. 
A)  When someone is applying for a job, the employer checks references to determine the previous work habits of the applicant. 
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 potential buyer requests documentation of the repair history of the car. 
D)  All of the above are correct.

Question 17

The fact that someone with a high risk of medical problems is likely to buy a large amount of health insurance is an example of

Accepted Answer

A)  adverse selection. 
B)  monitoring. 
C)  moral hazard. 
D)  screening. 
A)  adverse selection. 
B)  monitoring. 
C)  moral hazard. 
D)  screening.

Question 18

The state of Massachusetts requires all citizens to purchase medical insurance or face a monetary penalty when filing their taxes. The penalty is significantly less than the average annual insurance premium. Moreover, the state requires insurance companies to issue policies to anyone who applies, regardless of their health at the time of application. Which of the following examples describes the inherent adverse selection problem?

Accepted Answer

A)  Tricia purchases an insurance policy through her employer and visits her doctor for annual check-ups. 
B)  Sue purchases insurance only after learning that she has cancer. 
C)  Mike pays the penalty rather than purchasing insurance because it is cheaper for him than paying insurance premiums and he is generally in good health. 
D)  Both b and c are correct. 
A)  Tricia purchases an insurance policy through her employer and visits her doctor for annual check-ups. 
B)  Sue purchases insurance only after learning that she has cancer. 
C)  Mike pays the penalty rather than purchasing insurance because it is cheaper for him than paying insurance premiums and he is generally in good health. 
D)  Both b and c are correct.

Question 19

Table 22-1
Three friends -- Linda, Stephanie, and Jamie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: France, Greece, or Italy. They also agree that they will have two pairwise votes to determine where to go on vacation, 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 22-1. Depending on the order of the pairwise voting,

Accepted Answer

A)  the friends could go to either France, Italy, or Greece. 
B)  the friends could go to either France or Italy, but they will not go to Greece. 
C)  the friends could go to either Italy or Greece, but they will not go to France. 
D)  the friends could go to either France or Greece, but they will not go to Italy. 
A)  the friends could go to either France, Italy, or Greece. 
B)  the friends could go to either France or Italy, but they will not go to Greece. 
C)  the friends could go to either Italy or Greece, but they will not go to France. 
D)  the friends could go to either France or Greece, but they will not go to Italy.

Question 20

A woman gives her boyfriend a birthday present. The gift could be viewed by the boyfriend as a

Accepted Answer

A)  moral hazard problem. 
B)  screening device. 
C)  signal of how much she cares for him. 
D)  All of the above are correct. 
A)  moral hazard problem. 
B)  screening device. 
C)  signal of how much she cares for him. 
D)  All of the above are correct.

Political leaders are always aiming for an optimal combination of efficiency and equality.

The mathematical result showing that, under certain assumptions, there is no scheme for aggregating individual preferences into a valid set of social preferences is called

A street vendor sells a replica of a pair of designer shoes to a young woman who believes the shoes are authentic. The street vendor is engaging in

Studies of human decision making reveal several systematic mistakes people make. Which of the following is not an example of one of these mistakes?

Economic experiments show that people care more about winning a game than about its intrinsic fairness.

A "satisficer" is a person whose decision making is the same as that predicted by mainstream economic models.

What is the name of the mathematical result showing that no voting system can simultaneously satisfy the properties of unanimity, transitivity, independence of irrelevant alternatives, and no dictators?

Based on studies of human decision making, many people care more about the fairness of a game than about their personal winnings.

Which of the following is an example of asymmetric information?

The fact that someone with a high risk of medical problems is likely to buy a large amount of health insurance is an example of

A woman gives her boyfriend a birthday present. The gift could be viewed by the boyfriend as a

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

Political leaders are always aiming for an optimal combination of efficiency and equality.

The mathematical result showing that, under certain assumptions, there is no scheme for aggregating individual preferences into a valid set of social preferences is called

A street vendor sells a replica of a pair of designer shoes to a young woman who believes the shoes are authentic. The street vendor is engaging in

Studies of human decision making reveal several systematic mistakes people make. Which of the following is not an example of one of these mistakes?

Economic experiments show that people care more about winning a game than about its intrinsic fairness.

A "satisficer" is a person whose decision making is the same as that predicted by mainstream economic models.

What is the name of the mathematical result showing that no voting system can simultaneously satisfy the properties of unanimity, transitivity, independence of irrelevant alternatives, and no dictators?

Based on studies of human decision making, many people care more about the fairness of a game than about their personal winnings.

Which of the following is an example of asymmetric information?

The fact that someone with a high risk of medical problems is likely to buy a large amount of health insurance is an example of

A woman gives her boyfriend a birthday present. The gift could be viewed by the boyfriend as a

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