Exam 22: Frontiers of Microeconomics

Researchers have found that the systematic mistakes that people make in their decision making include a lack of confidence in their own abilities.

Refer to Narrative 22-1. Which of the ladies is the victim of an adverse selection problem?

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. If the vote were conducted according to a Borda count system where each person's first choice receives 4 points, second choice 3 points, third choice 2 points, and fourth choice 1 point, the election winner would be

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

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums. This practice is best described as an example of

The problem that results from an agent, who is imperfectly monitored by the principal, engaging in dishonest or otherwise undesirable behavior is called

Which of the following is an example of informational asymmetry?

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. If the first vote pits France against Italy and the second vote pits Greece against the winner of the first vote, then the outcome is as follows:

Peter was recently hired as a salesman for a national consulting firm. His job involves spending a significant portion of his time out of the office visiting prospects and attending conferences. Which of the following is a strategy the consulting firm may employ to discourage Peter from shirking his responsibilities?

The tendency of many people to procrastinate supports the view that people are consistent over time.

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

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

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.

Your friend tells you that her dad just suffered from a stroke because his blood pressure and cholesterol were too high. You know that your own father also has high blood pressure so you become worried that he will also have a stroke. This is an example of which systematic mistake that people make?

Arrow's impossibility theorem demonstrates the impossibility of the median voter theorem.

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. Which of the following statements is correct?

The Arrow impossibility theorem shows that

When a corporation decides to include its own corporate stock as part of the compensation for its employees, it is trying to solve the

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?