Question 1

Table 22-2
Three longtime friends-Jack, Ryan, and Colin-are deciding how they will spend their Sunday afternoon. They all agree that they should do one of three things: go to a movie, go to the zoo, or go to a museum. They also agree that they will have two pairwise votes to determine how to spend their evening, 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.Which of the following statements is correct?

Accepted Answer

A)  In a pairwise election, "zoo" beats "movie." 
B)  In a pairwise election, "baseball game" beats "zoo." 
C)  In a pairwise election, "movie" beats "baseball game." 
D)  All of the above are correct.

Question 2

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

Question 3

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

Question 4

Behavioral economics

Accepted Answer

A)  integrates psychological insights into economic models. 
B)  relies on the assumption that homo economicus describes economic decision-making. 
C)  assumes that economic agents have full information about the conditions surrounding their decisions. 
D)  All of the above are correct.

Question 5

The Latin term caveat emptor,meaning "let the buyer beware," brings to mind the problem of

Accepted Answer

A)  hidden actions. 
B)  adverse selection. 
C)  principals and agents. 
D)  moral hazard.

Question 6

Economic theory assumes that voters,politicians,and other political participants are largely motivated by

Accepted Answer

A)  personal self-interest. 
B)  altruism. 
C)  a desire to promote the general welfare. 
D)  a desire to promote allocative economic efficiency.

Question 7

People interpret evidence to confirm beliefs they already hold.This statement is an example of 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.

Question 8

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.

Question 9

Herbert Simon,one of the first social scientists to combine the study of economics and psychology,suggested that humans should be viewed as

Accepted Answer

A)  rational maximizers. 
B)  satisficers. 
C)  independent thinkers. 
D)  signalers.

Question 10

If the median voter theorem holds,

Accepted Answer

A)  a Borda count will violate the principle of transitivity. 
B)  the Condorcet paradox also holds. 
C)  minority views will not receive much consideration. 
D)  All of the above are correct.

Question 11

Employers can try to overcome the moral-hazard problem involving their employees by

Accepted Answer

A)  paying their employees more often. 
B)  paying their employees below-equilibrium wages since the employees will likely shirk some of their responsibilities. 
C)  better monitoring their employees' work efforts. 
D)  requiring their employees to take a pre-employment work effort test.

Question 12

Which of the following is not an example of signaling?

Accepted Answer

A)  An employer asks if he can run a background check on 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)  An college applicant lists her membership in academic honor societies on her application.

Question 13

When one party is better informed about an economic situation than another party,economists describe the problem as one of

Accepted Answer

A)  asymmetric information. 
B)  moral hazard. 
C)  political economy. 
D)  behavioral economics

Question 14

The median voter's preferred outcome is the same as the

Accepted Answer

A)  average preferred outcome. 
B)  outcome preferred by the greatest number of voters. 
C)  outcome produced by majority rule. 
D)  outcome preferred by Arrow's "perfect" voter.

Question 15

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.

Question 16

Normally,we expect voters' preferences to exhibit a property called

Accepted Answer

A)  transitivity. 
B)  transversality. 
C)  normality. 
D)  universality.

Question 17

Information asymmetry refers to

Accepted Answer

A)  the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior. 
B)  the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party. 
C)  an action taken by an informed party to reveal private information to an uninformed party. 
D)  a difference in access to relevant knowledge.

Question 18

An implication of the median voter theorem is that,in a race between Republicans and Democrats,

Accepted Answer

A)  if Republicans want to win, they will take a "middle-of-the-road" stance on many issues. 
B)  if Democrats want to win, they will take an extreme stance on many issues. 
C)  Republicans and Democrats go to extremes to differentiate themselves from one another. 
D)  Republicans and Democrats work hard to identify the fringe voters.

Question 19

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.

Question 20

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.

Exam 22: Frontiers in Microeconomics.