Question 1

Table 22-17
Voter Type
 
-Refer to Table 22-17. The table shows the preferences of three types of voters over three possible outcomes: A, B, and C. In addition, the table shows the percentage of voters of each type. Based on this information, which of the following statements is true?

Accepted Answer

A)  As the Condorcet Paradox predicts, majority rule fails to produce transitive preferences for society. 
B)  As Arrow's Impossibility Theorem demonstrates, it is impossible from this information to determine which outcome the voters prefer. 
C)  The median voter theorem allows us to conclude that in a vote between B and C, B will win since the Type 2 voter is the median voter. 
D)  While the Condorcet Paradox predicts that majority rule may not produce transitive preferences for society as a whole, society's preferences in this case are transitive.

Question 2

The Condorcet paradox demonstrates that the result of a majority vote may be affected by

Accepted Answer

A)  moral hazard. 
B)  adverse selection. 
C)  the order of the votes. 
D)  All of the above are correct.

Question 3

Ed promises his wife that he will mow the lawn on Saturday morning, but when Saturday morning arrives he changes his mind and says he will do it on Sunday. What insight about human behavior can be deduced from Ed's decision?

Accepted Answer

The answer of Ed promises his wife that he will...

Question 4

Table 22-24
The citizens of Mayville are having a severe budget shortage and are faced with eliminating athletics from the town high school. The town administrator has determined that the town can afford to maintain one sport. 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 22-24. If the town administrator asks voters to choose first between basketball and football and then between the winner of the first vote and hockey, which sport will win the final vote?

Accepted Answer

The answer of Table 22-24
The citizens of Mayville are having...

Question 5

Table 22-10
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 22-10. If a Borda count is used, which option will win?

Accepted Answer

A)  arts 
B)  police 
C)  streetlights 
D)  taxes

Question 6

An example of signaling is a boyfriend giving an expensive, romantic gift to his girlfriend to convey his love for her.

Accepted Answer

A) True 
 B)False

Question 7

Table 22-16
The Johnson family is planning a vacation and, though Mr. and Mrs. Johnson will be paying for the trip, they have decided to use a democratic voting process to choose their destination. The family members' preferences are reflected in the table below.
 
-Refer to Table 22-16. Suppose that before the family can arrive at their decision, Opryland announced that it will be closed for the season due to flooding. If the family uses a Borda count, their vacation destination will be

Accepted Answer

A)  Grand Canyon 
B)  Sea World 
C)  Disneyland 
D)  There is a tie between the Grand Canyon and Disneyland.

Question 8

When a jeweler sells a low quality diamond to a young man who believes the diamond is the highest quality, she is engaging in

Accepted Answer

A)  both moral hazard and adverse selection. 
B)  neither moral hazard nor adverse selection. 
C)  moral hazard, but not adverse selection. 
D)  adverse selection, but not moral hazard.

Question 9

Which of the following is not an example of a moral hazard problem?

Accepted Answer

A)  A manager stays late one evening so that her employee can leave early to attend his child's music recital. 
B)  A small child takes an extra cookie from the cookie jar when he thinks his mom isn't watching him closely. 
C)  An employee plays solitaire on her computer at 4:30 p.m. on a Friday when her boss has left for the day. 
D)  A customer whose new eyeglasses come with a "60­day insurance policy in case of breakage" leaves her glasses out where her new puppy can chew on them.

Question 10

Table 22-6
 
-Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. If a Borda count election were held among these voters, giving three points to each voter's first choice, two points to the second choice, and one point to the last choice, which outcome would win the election?

Accepted Answer

A)  Outcome A 
B)  Outcome B 
C)  Outcome C 
D)  Either outcome A or outcome C since these have the same total score.

Question 11

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

Question 12

An implication of the median voter theorem is that Republicans and Democrats will try to align their views with those of the median voter.

Accepted Answer

A) True 
 B)False

Question 13

When markets fail, which of the following is true?

Accepted Answer

A)  Government intervention can always improve outcomes. 
B)  Government intervention can potentially improve outcomes. 
C)  Government intervention can never improve outcomes. 
D)  Markets do not fail.

Question 14

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

Question 15

One way that employers respond to the moral-hazard problem is by monitoring their employees.

Accepted Answer

A) True 
 B)False

Question 16

The Condorcet paradox demonstrates that the order in which people vote on choices may influence the final outcome.

Accepted Answer

A) True 
 B)False

Question 17

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums. This practice is best described as an example of

Accepted Answer

A)  screening. 
B)  behavioral economics. 
C)  monitoring. 
D)  signaling.

Question 18

According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time

Accepted Answer

A)  is rational behavior. 
B)  likely occurs because saving requires a sacrifice in the present for a reward in the distant future. 
C)  likely occurs because Americans don't care about retirement. 
D)  definitely would not happen if Americans earned a greater return on their investments.

Question 19

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk- throughs per night, it is an example of

Accepted Answer

A)  both moral hazard and adverse selection. 
B)  neither moral hazard nor adverse selection. 
C)  moral hazard, but not adverse selection. 
D)  adverse selection, but not moral hazard.

Question 20

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

The answer of Lindsay and Tim are playing the ultimatum...

Exam 22: Frontiers of Microeconomics

Table 22-17 Voter Type -Refer to Table 22-17. The table shows the preferences of three types of voters over three possible outcomes: A, B, and C. In addition, the table shows the percentage of voters of each type. Based on this information, which of the following statements is true?

The Condorcet paradox demonstrates that the result of a majority vote may be affected by

Ed promises his wife that he will mow the lawn on Saturday morning, but when Saturday morning arrives he changes his mind and says he will do it on Sunday. What insight about human behavior can be deduced from Ed's decision?

An example of signaling is a boyfriend giving an expensive, romantic gift to his girlfriend to convey his love for her.

When a jeweler sells a low quality diamond to a young man who believes the diamond is the highest quality, she is engaging in

Which of the following is not an example of a moral hazard problem?

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

An implication of the median voter theorem is that Republicans and Democrats will try to align their views with those of the median voter.

When markets fail, which of the following is true?

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

One way that employers respond to the moral-hazard problem is by monitoring their employees.

The Condorcet paradox demonstrates that the order in which people vote on choices may influence the final outcome.

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums. This practice is best described as an example of

According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk- throughs per night, it is an example of

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