Question 1

Which of the following is a lesson from the Condorcet paradox?

Accepted Answer

A)  If voters are choosing a point along a line, then majority rule will pick the most preferred point of the median voter. 
B)  Under certain conditions, there is no scheme for aggregating individual preferences. 
C)  When there are more than two options, deciding the order in which to vote can have a powerful influence over the outcome of an election. 
D)  Majority voting always indicates what outcome a society really wants. 
A)  If voters are choosing a point along a line, then majority rule will pick the most preferred point of the median voter. 
B)  Under certain conditions, there is no scheme for aggregating individual preferences. 
C)  When there are more than two options, deciding the order in which to vote can have a powerful influence over the outcome of an election. 
D)  Majority voting always indicates what outcome a society really wants.

Question 2

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?

Accepted Answer

A)  In a pairwise election, "arena" beats "library." 
B)  In a pairwise election, "library" beats "recreation center." 
C)  In a pairwise election, "recreation center" beats "arena." 
D)  All of the above are correct. 
A)  In a pairwise election, "arena" beats "library." 
B)  In a pairwise election, "library" beats "recreation center." 
C)  In a pairwise election, "recreation center" beats "arena." 
D)  All of the above are correct.

Question 3

If you are assigned the role of Player A in the Ultimatum game and you propose that player B gets $1 and you get $99

Accepted Answer

A)  you are behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
B)  you are behaving as a rational wealth-maximizer and player B is likely to reject your offer. 
C)  you are not behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
D)  you are not behaving as a rational wealth-maximizer and player B is likely to reject your offer. 
A)  you are behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
B)  you are behaving as a rational wealth-maximizer and player B is likely to reject your offer. 
C)  you are not behaving as a rational wealth-maximizer and player B is likely to accept your offer. 
D)  you are not behaving as a rational wealth-maximizer and player B is likely to reject your offer.

Question 4

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. Based on this information, the median voter's first choice is

Accepted Answer

A)  X 
B)  Y 
C)  Z 
D)  The median voter's first choice cannot be determined from the information given. 
A)  X 
B)  Y 
C)  Z 
D)  The median voter's first choice cannot be determined from the information given.

Question 5

The moral-hazard problem and the desire of firms to lessen that problem serve as a plausible explanation for a firm paying above-equilibrium wages to its workers.

Accepted Answer

A) True 
 B)False

Question 6

Table 22-25
Sophie, Huan, and Santiago are lost with no map or GPS available. They come to an intersection at which they can turn left, turn right, or continue going straight. Their preferences are summarized in the table.  
-Refer to Table 22-25. If the travelers decide to use a Borda count, what is the result?

Accepted Answer

The answer of Table 22-25
Sophie, Huan, and Santiago are lost...

Question 7

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This may be reducing sales. If you want your employee to stop giving larger scoops to friends and relatives, which of the following is not a good approach?

Accepted Answer

A)  Make visits to the store at the same time each day. 
B)  Pay employees an above equilibrium wage. 
C)  Give your employees a monthly bonus based on profits. 
D)  None of the above are good approaches. 
A)  Make visits to the store at the same time each day. 
B)  Pay employees an above equilibrium wage. 
C)  Give your employees a monthly bonus based on profits. 
D)  None of the above are good approaches.

Question 8

Which of the following is not an example of a systematic mistake that people make?

Accepted Answer

A)  When asked to predict how many movie stars he can list, Ed says 200 but when put to the test he can only name 130. 
B)  Susan watched a home improvement show in which a contractor installed a faulty deck which collapsed within 2 years of installation. She is now concerned about the safety of her own deck. 
C)  Kate's manager asks her to work additional hours for which she will be paid her usual hourly wage. Kate weighs the value of her leisure time against the additional wages before responding to her manager. 
D)  Bill has purchased Skillman tools for years and has recently noticed a decline in quality and durability of Skillman tools. Still, when he needs a new drill, he purchases a Skillman brand drill. 
A)  When asked to predict how many movie stars he can list, Ed says 200 but when put to the test he can only name 130. 
B)  Susan watched a home improvement show in which a contractor installed a faulty deck which collapsed within 2 years of installation. She is now concerned about the safety of her own deck. 
C)  Kate's manager asks her to work additional hours for which she will be paid her usual hourly wage. Kate weighs the value of her leisure time against the additional wages before responding to her manager. 
D)  Bill has purchased Skillman tools for years and has recently noticed a decline in quality and durability of Skillman tools. Still, when he needs a new drill, he purchases a Skillman brand drill.

Question 9

In a moral hazard problem, the agent is unable to perfectly monitor the principal's behavior so the principal applies less effort than the agent considers desirable.

Accepted Answer

A) True 
 B)False

Question 10

Lindsay and Tim are playing the ultimatum game starting with $100. Based on the coin toss, Lindsay is the player to propose a division of the $100. If Lindsay acts as economic theory assumes and Tim acts as experimental evidence shows, Tim will

Accepted Answer

reject Lindsay's pro

Question 11

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

Accepted Answer

A)  adverse selection 
B)  screening 
C)  moral hazard 
D)  signaling 
A)  adverse selection 
B)  screening 
C)  moral hazard 
D)  signaling

Question 12

An efficiency wage

Accepted Answer

A)  gives an employee an incentive to shirk his duties. 
B)  is lower than the equilibrium wage for that position and region. 
C)  is higher than the equilibrium wage for that position and region. 
D)  both a and b are correct. 
A)  gives an employee an incentive to shirk his duties. 
B)  is lower than the equilibrium wage for that position and region. 
C)  is higher than the equilibrium wage for that position and region. 
D)  both a and b are correct.

Question 13

Table 22-23
The town of Franklin is facing a severe budget shortage. The town administrator has proposed four options to balance the budget: increase property taxes (taxes), cut the school arts budget (arts), turn off half of the streetlights in the town (streetlights), reduce police patrols (police). Exactly one of the four 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 22-23. If the town administrator asks the people to first choose between cutting the arts program and turning off half of the streetlights, and then choose between the winner of the first election and reducing police patrols, and then choose between the winner of the second election and increasing taxes, which option will win each vote?

Accepted Answer

streetligh

Question 14

In corporations, a principal-agent problem can arise when

Accepted Answer

A)  the shareholders are the principal and the managers are the agent. 
B)  the board of directors is the principal and the managers are the agent. 
C)  the shareholders are the principal and the board of directors is the agent. 
D)  All of the above are correct. 
A)  the shareholders are the principal and the managers are the agent. 
B)  the board of directors is the principal and the managers are the agent. 
C)  the shareholders are the principal and the board of directors is the agent. 
D)  All of the above are correct.

Question 15

Suppose a community is debating how much money to spend on improvements to the high school. The members of the community who have children advocate spending $20 million to make improvements. The remaining 60% of the community thinks the high school is just fine and does not want to spend anything. What will the outcome be?

Accepted Answer

$0 spent o

Question 16

Majority rule will produce the outcome most preferred by the median voter, as demonstrated by the

Accepted Answer

A)  Arrow impossibility theorem. 
B)  Condorcet paradox. 
C)  pairwise voting proposition. 
D)  median voter theorem. 
A)  Arrow impossibility theorem. 
B)  Condorcet paradox. 
C)  pairwise voting proposition. 
D)  median voter theorem.

Question 17

Which of the following is not an example of a principal-agent relationship?

Accepted Answer

A)  a soccer player and her coach 
B)  a man and his neighbor 
C)  an construction worker and his foreman 
D)  a driver and her insurance agent 
A)  a soccer player and her coach 
B)  a man and his neighbor 
C)  an construction worker and his foreman 
D)  a driver and her insurance agent

Question 18

The Condorcet voting paradox demonstrates that democratic outcomes do not always obey the property of

Accepted Answer

A)  narrowness of preferences. 
B)  concavity of preferences. 
C)  asymmetry of preferences. 
D)  transitivity of preferences. 
A)  narrowness of preferences. 
B)  concavity of preferences. 
C)  asymmetry of preferences. 
D)  transitivity of preferences.

Question 19

The field of political economy

Accepted Answer

A)  applies the methods of political science to microeconomics. 
B)  applies the methods of political science to macroeconomics. 
C)  is relevant to the issue of how active government should be in economic matters. 
D)  integrates psychological insights to better understand individual choices. 
A)  applies the methods of political science to microeconomics. 
B)  applies the methods of political science to macroeconomics. 
C)  is relevant to the issue of how active government should be in economic matters. 
D)  integrates psychological insights to better understand individual choices.

Question 20

Which of the following is not an example of signaling?

Accepted Answer

A)  An employer calls the references of a potential employee before hiring him or her. 
B)  A boyfriend gives his girlfriend a necklace with her favorite gemstone for Valentine's Day. 
C)  A home flooring company advertises its high Better Business Bureau rating during its television commercials. 
D)  A company advertises that it makes charitable contributions. 
A)  An employer calls the references of a potential employee before hiring him or her. 
B)  A boyfriend gives his girlfriend a necklace with her favorite gemstone for Valentine's Day. 
C)  A home flooring company advertises its high Better Business Bureau rating during its television commercials. 
D)  A company advertises that it makes charitable contributions.

Exam 22: Frontiers of Microeconomics

Which of the following is a lesson from the Condorcet paradox?

If you are assigned the role of Player A in the Ultimatum game and you propose that player B gets $1 and you get $99

The moral-hazard problem and the desire of firms to lessen that problem serve as a plausible explanation for a firm paying above-equilibrium wages to its workers.

Which of the following is not an example of a systematic mistake that people make?

In a moral hazard problem, the agent is unable to perfectly monitor the principal's behavior so the principal applies less effort than the agent considers desirable.

Lindsay and Tim are playing the ultimatum game starting with $100. Based on the coin toss, Lindsay is the player to propose a division of the $100. If Lindsay acts as economic theory assumes and Tim acts as experimental evidence shows, Tim will

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

An efficiency wage

In corporations, a principal-agent problem can arise when

Majority rule will produce the outcome most preferred by the median voter, as demonstrated by the

Which of the following is not an example of a principal-agent relationship?

The Condorcet voting paradox demonstrates that democratic outcomes do not always obey the property of

The field of political economy

Which of the following is not an example of signaling?

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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