Question 1

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

Accepted Answer

A) True 
 B)False

Question 2

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 friends change their minds and decide to choose a vacation destination using a Borda count, then

Accepted Answer

A)  the friends will go to France. 
B)  the friends will go to Greece. 
C)  the friends will go to Italy. 
D)  A Borda count will not result in a single winner in this case. 
A)  the friends will go to France. 
B)  the friends will go to Greece. 
C)  the friends will go to Italy. 
D)  A Borda count will not result in a single winner in this case.

Question 3

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Accepted Answer

A)  physics. 
B)  biology. 
C)  psychology. 
D)  anthropology. 
A)  physics. 
B)  biology. 
C)  psychology. 
D)  anthropology.

Question 4

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 5

Table 22-19
The 600 voters of Appleton are deciding by majority rule how much to spend on a new library.  
-Refer to Table 22-19. The median voter prefers to spend

Accepted Answer

A)  $2 million. 
B)  $3 million. 
C)  $3.5 million. 
D)  $4 million. 
A)  $2 million. 
B)  $3 million. 
C)  $3.5 million. 
D)  $4 million.

Question 6

Effective signals

Accepted Answer

A)  convey useful information from informed parties to uninformed parties. 
B)  impose little or no cost on the signaler. 
C)  cannot be conveyed accurately when there is an information asymmetry. 
D)  raise the quantity sold but reduce the price sellers receive. 
A)  convey useful information from informed parties to uninformed parties. 
B)  impose little or no cost on the signaler. 
C)  cannot be conveyed accurately when there is an information asymmetry. 
D)  raise the quantity sold but reduce the price sellers receive.

Question 7

When some people are better informed than others and the imbalance affects the choices they make, economists say there is

Accepted Answer

asymmetric

Question 8

Which of the following is not correct?

Accepted Answer

A)  Economics is a study of the choices that people make and the resulting interactions they have with one another. 
B)  In areas it has already studied, economists have found perfect and unchanging answers. 
C)  Economists are trying to expand their understanding of human behavior and society. 
D)  The economics of asymmetric information, political economy, and behavioral economics are all topics at the frontier of microeconomics. 
A)  Economics is a study of the choices that people make and the resulting interactions they have with one another. 
B)  In areas it has already studied, economists have found perfect and unchanging answers. 
C)  Economists are trying to expand their understanding of human behavior and society. 
D)  The economics of asymmetric information, political economy, and behavioral economics are all topics at the frontier of microeconomics.

Question 9

Frequently it is the case that: (1) A worker knows more than his employer about how much effort he puts into his job, and (2) the seller of a used car knows more than the buyer about the car's condition.

Accepted Answer

A)  Neither (1) nor (2) serves as an example of asymmetric information. 
B)  Both (1) and (2) serve as examples of asymmetric information. 
C)  Neither (1) nor (2) serves as an example of a hidden action. 
D)  Both (1) and (2) serve as examples of hidden action. 
A)  Neither (1) nor (2) serves as an example of asymmetric information. 
B)  Both (1) and (2) serve as examples of asymmetric information. 
C)  Neither (1) nor (2) serves as an example of a hidden action. 
D)  Both (1) and (2) serve as examples of hidden action.

Question 10

The field of economics that combines the study the psychology of human behavior and economic issues is

Accepted Answer

behavioral

Question 11

A safe driver would likely choose an auto insurance policy with a

Accepted Answer

A)  low premium and a high deductible. 
B)  high premium and a high deductible. 
C)  high premium and a low deductible. 
D)  high premium and no deductible. 
A)  low premium and a high deductible. 
B)  high premium and a high deductible. 
C)  high premium and a low deductible. 
D)  high premium and no deductible.

Question 12

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 13

Economic theory assumes people are always rational. Yet observation indicates that people do not always behave rationally. Which of the following is not a systematic mistake people make in their decisionmaking?

Accepted Answer

A)  People often interpret information to fit beliefs already held. 
B)  People place too much emphasis in their decisionmaking on a few extreme situations of which they are aware. 
C)  People tend to view current prices differently than they view future prices. 
D)  People are too sure of their own abilities. 
A)  People often interpret information to fit beliefs already held. 
B)  People place too much emphasis in their decisionmaking on a few extreme situations of which they are aware. 
C)  People tend to view current prices differently than they view future prices. 
D)  People are too sure of their own abilities.

Question 14

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 15

Asymmetric information, political economy, and behavioral economics

Accepted Answer

A)  are topics at the frontier of microeconomics. 
B)  are topics that economists no longer research. 
C)  are being studied as economists try to expand their understanding of human behavior and society. 
D)  both a and c are correct. 
A)  are topics at the frontier of microeconomics. 
B)  are topics that economists no longer research. 
C)  are being studied as economists try to expand their understanding of human behavior and society. 
D)  both a and c are correct.

Question 16

According to behavioral economics, an employee will likely

Accepted Answer

A)  work harder if she is a satisficer and if she believes a coworker is overpaid. 
B)  work harder if she is a satisficer, but work less hard if she believes a coworker is overpaid. 
C)  work harder if she believes a coworker is overpaid, but work less hard if she is a satisficer. 
D)  work less hard if she is a satisficer and if she believes a coworker is overpaid. 
A)  work harder if she is a satisficer and if she believes a coworker is overpaid. 
B)  work harder if she is a satisficer, but work less hard if she believes a coworker is overpaid. 
C)  work harder if she believes a coworker is overpaid, but work less hard if she is a satisficer. 
D)  work less hard if she is a satisficer and if she believes a coworker is overpaid.

Question 17

Arrow's impossibility theorem illustrates the difficulties in creating the perfect voting system.

Accepted Answer

A) True 
 B)False

Question 18

Some studies show the even students who earned high grades in science classes provide disproven explanations for scientific phenomena. These disproven explanations had been acquired prior to the science classes. These studies provide some support for 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 19

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 20

According to the median voter theorem, majority rule will

Accepted Answer

A)  always produce an inconclusive outcome. 
B)  produce the outcome least preferred by the median voter. 
C)  produce the outcome most preferred by the median voter. 
D)  produce an outcome that is inconsistent with transitive preferences. 
A)  always produce an inconclusive outcome. 
B)  produce the outcome least preferred by the median voter. 
C)  produce the outcome most preferred by the median voter. 
D)  produce an outcome that is inconsistent with transitive preferences.

Exam 22: Frontiers of Microeconomics

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Which of the following is not correct?

Table 22-19 The 600 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-19. The median voter prefers to spend

Effective signals

When some people are better informed than others and the imbalance affects the choices they make, economists say there is

Which of the following is not correct?

Frequently it is the case that: (1) A worker knows more than his employer about how much effort he puts into his job, and (2) the seller of a used car knows more than the buyer about the car's condition.

The field of economics that combines the study the psychology of human behavior and economic issues is

A safe driver would likely choose an auto insurance policy with a

Economic theory assumes people are always rational. Yet observation indicates that people do not always behave rationally. Which of the following is not a systematic mistake people make in their decisionmaking?

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?

Asymmetric information, political economy, and behavioral economics

According to behavioral economics, an employee will likely

Arrow's impossibility theorem illustrates the difficulties in creating the perfect voting system.

According to the median voter theorem, majority rule will

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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