Exam 22: Frontiers of Microeconomics

The assertion that the median voter is "king" refers directly to the result established by the

Scenario 22-3 At issue in a particular city vote is how much to spend, per person, on road repair next year. Among the 10,000 voters, 2,900 prefer to spend $500 per person, but no more; 2,200 prefer to spend $600 per person, but no more; 1,900 prefer to spend $800 per person, but no more; 1,600 prefer to spend $1,200 but no more, and 1,400 prefer to spend $1,400 per person, but no more. -Refer to Scenario 22-3. If there is a vote on whether to spend $800 per person or $1,200 per person, the median voter will vote to spend

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

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

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

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

If the median voter theorem holds,

The failure of majority rule to produce transitive preferences for society is called the

Government action in cases of asymmetric information may not be an ideal solution because

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 pairwise majority voting with A versus B, then the winner of that vote versus C, then the winner of that vote versus D, which policy wins?

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

Table 22-15 Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below. -Refer to Table 22-15. If elections were held where voters choose either Fred or Mary, and then choose either the winner or Beth, what would the results be?

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 (1) the first vote pits "library" against "recreation center," and (2) the second vote pits "arena" against the winner of the first vote, then the outcome is as follows:

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

When asymmetric information affects a relationship between two parties, it is always the case that

The Condorcet paradox

Insurance companies charge annual premiums to collect revenue, which they then use to pay customers who file claims for damages they incur. As a result of the moral hazard problem (1) what is the effect on the percentage of policy holders making claims, and (2) what is the effect on the average premium charged when compared to a world with no moral hazard problem?

Arrow's impossibility theorem states that the majority rule fails to produce transitive preferences for society.

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 (1) the first vote pits "baseball game" against "golf," and (2) the second vote pits "movie" against the winner of the first vote, then

Severe adverse-selection problems may result in