Question 1

Herbert Simon suggested that people are not rational maximizers but satisficers, meaning that they choose a course of action that is

Accepted Answer

A)  personally satisfying, with a greater emphasis on personal consumption than on fairness. 
B)  socially satisfying, with a greater emphasis on fairness than on personal consumption. 
C)  good enough. 
D)  risk averse. 
A)  personally satisfying, with a greater emphasis on personal consumption than on fairness. 
B)  socially satisfying, with a greater emphasis on fairness than on personal consumption. 
C)  good enough. 
D)  risk averse.

Question 2

Economists have found that asymmetric information is not very prevalent.

Accepted Answer

A) True 
 B)False

Question 3

Scenario 22-2
A wireless telephone service provider offers three service plans to its consumers.  
-Refer to Scenario 22-2. By offering consumers these choices, the wireless telephone provider is

Accepted Answer

A)  signaling to customers that they offer great customer service. 
B)  screening customers to reveal how much they plan to use the service. 
C)  creating asymmetric information because only the firm knows the true cost of the service. 
D)  engaging in a principal-agent problem 
A)  signaling to customers that they offer great customer service. 
B)  screening customers to reveal how much they plan to use the service. 
C)  creating asymmetric information because only the firm knows the true cost of the service. 
D)  engaging in a principal-agent problem

Question 4

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "transitivity" to mean

Accepted Answer

A)  A beats B only if everyone prefers A to B. 
B)  if everyone prefers A to B, then A beats B. 
C)  if A beats B and B beats C, then A must beat C. 
D)  everyone who is eligible to vote must vote; otherwise, the outcome is invalid. 
A)  A beats B only if everyone prefers A to B. 
B)  if everyone prefers A to B, then A beats B. 
C)  if A beats B and B beats C, then A must beat C. 
D)  everyone who is eligible to vote must vote; otherwise, the outcome is invalid.

Question 5

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 6

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. Which pairwise voting scheme would result in outcome A?

Accepted Answer

A)  First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B)  First, choose between A and C. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and D. 
C)  First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D)  First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B. 
A)  First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. 
B)  First, choose between A and C. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and D. 
C)  First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. 
D)  First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B.

Question 7

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 8

Refer to Narrative 22-1. Which of the ladies is an agent?

Accepted Answer

A)  Shana 
B)  Katie 
C)  Belinda 
D)  Magda 
A)  Shana 
B)  Katie 
C)  Belinda 
D)  Magda

Question 9

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. Suppose Shana is tired of all of the problems with the brand of jeans she carries and decides to carry a different, higher quality brand instead. She is concerned that her customers will not trust the quality of the new brand so she offers a 60 day money-back guarantee. The action taken by Shana is called

Accepted Answer

The answer of Scenario 22-6
Shana owns a boutique that sells...

Question 10

Recent developments in political economy

Accepted Answer

A)  render much of the traditional field of political science obsolete. 
B)  render much of the traditional field of economics obsolete. 
C)  illustrate the resolute nature of democracy. 
D)  point to the fact that government is a less-than-perfect institution. 
A)  render much of the traditional field of political science obsolete. 
B)  render much of the traditional field of economics obsolete. 
C)  illustrate the resolute nature of democracy. 
D)  point to the fact that government is a less-than-perfect institution.

Question 11

Table 22-2
Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their Sunday afternoon. They all agree that they should do one of three things: go to a movie, play golf, or go to a baseball game. They also agree that they will have two pairwise votes to determine how to spend their afternoon, 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 22-2. If Allen, Brian, and Cody use a Borda count, rather than pairwise majority voting, to decide how to spend their afternoon, then they will

Accepted Answer

A)  watch a movie. 
B)  play golf. 
C)  watch a baseball game. 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance. 
A)  watch a movie. 
B)  play golf. 
C)  watch a baseball game. 
D)  None of the above is correct; a Borda count fails to produce a winner in this instance.

Question 12

Suppose that residents of a town are asked to vote on the best day to improve the safety of an intersection. The three choices are: a stoplight, a 4-way stop, and a 2-way stop. The mayor asks the residents to assign 3 points to their first choice, 2 points to their second choice, and 1 point to their last choice. The intersection will be controlled by the method that receives the most points. This voting scheme is called

Accepted Answer

A)  Arrow's impossibility theorem. 
B)  the Condorcet paradox. 
C)  a Borda count. 
D)  the median voter theorem. 
A)  Arrow's impossibility theorem. 
B)  the Condorcet paradox. 
C)  a Borda count. 
D)  the median voter theorem.

Question 13

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany 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 14

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 15

The Condorcet paradox tells us that, even though it is impossible to satisfy all of Arrow's properties of a desirable voting system, pairwise majority voting will always satisfy transitivity.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a common response to the moral hazard problem that employers face?

Accepted Answer

A)  offering all employees some funding for additional education 
B)  paying efficiency wages 
C)  requiring employees to provide itemized receipts for reimbursable expenses 
D)  paying year-end bonuses rather than higher monthly earnings 
A)  offering all employees some funding for additional education 
B)  paying efficiency wages 
C)  requiring employees to provide itemized receipts for reimbursable expenses 
D)  paying year-end bonuses rather than higher monthly earnings

Question 17

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Accepted Answer

A)  the Condorcet Paradox. 
B)  signaling. 
C)  moral hazard. 
D)  screening. 
A)  the Condorcet Paradox. 
B)  signaling. 
C)  moral hazard. 
D)  screening.

Question 18

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Accepted Answer

A)  signaling. 
B)  screening. 
C)  monitoring. 
D)  principal. 
A)  signaling. 
B)  screening. 
C)  monitoring. 
D)  principal.

Question 19

Which voter is the voter whose views on a policy issue are in the middle of the spectrum, with half of the voters on one side of this voter's view and half on the other side.

Accepted Answer

A)  Average voter 
B)  Mean voter 
C)  Modal voter 
D)  Median voter 
A)  Average voter 
B)  Mean voter 
C)  Modal voter 
D)  Median voter

Question 20

Which of the following frontier areas of economics incorporates some findings from psychology into the study of economic issues?

Accepted Answer

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

Exam 22: Frontiers of Microeconomics

Herbert Simon suggested that people are not rational maximizers but satisficers, meaning that they choose a course of action that is

Economists have found that asymmetric information is not very prevalent.

Scenario 22-2 A wireless telephone service provider offers three service plans to its consumers. -Refer to Scenario 22-2. By offering consumers these choices, the wireless telephone provider is

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "transitivity" to mean

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

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. Which pairwise voting scheme would result in outcome A?

Which of the following statements is not correct?

Refer to Narrative 22-1. Which of the ladies is an agent?

Recent developments in political economy

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany exhibit?

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

The Condorcet paradox tells us that, even though it is impossible to satisfy all of Arrow's properties of a desirable voting system, pairwise majority voting will always satisfy transitivity.

Which of the following is not a common response to the moral hazard problem that employers face?

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Suppose that an economics department is offering a student exchange program with a university in Giessen, Germany. If the department requires students to submit an essay in order to be considered for the program, the essay may be an example of

Which voter is the voter whose views on a policy issue are in the middle of the spectrum, with half of the voters on one side of this voter's view and half on the other side.

Which of the following frontier areas of economics incorporates some findings from psychology into the study of economic issues?

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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