Question 1

In economics,a difference in access to relevant knowledge is called a(n)

Accepted Answer

A)   relevancy frontier.
B)   knowledge gap.
C)   information asymmetry.
D)   information equilibrium.E) B) and C)
F) None of the above

Question 2

Table 22-13
The fortunate residents of Anytown have a budget surplus. The mayor decided that it is only fair to have the residents vote on what to do with the surplus. The mayor has narrowed the options down to three possible projects: a playground, a library, or a swimming pool. The voters fall into three categories and have preferences as illustrated in the table.
 
-Refer to Table 22-13.If the mayor asks the residents to choose between the playground and the library using pairwise voting,

Accepted Answer

A)   the playground wins by 45%.
B)   the playground wins by 60%.
C)   the library wins by 20%.
D)   the library wins by 80%.E) None of the above
F) A) and D)

Question 3

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $50 will propose that she get $49 and that the other player get $1.By the same reasoning,if the amount to be split is $1000,the player proposing the split will propose that she gets

Accepted Answer

A)   $500 and that the other player gets $500.
B)   $998 and that the other player gets $2.
C)   $999 and that the other player gets $1.
D)   $1000 and that the other player gets nothing.E) None of the above
F) A) and B)

Question 4

A woman gives her boyfriend a birthday present.The gift could be viewed by the boyfriend as a

Accepted Answer

A)   moral hazard problem.
B)   screening device.
C)   signal of how much she cares for him.
D)   All of the above are correct.E) A) and B)
F) All of the above

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 22-4
Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
 
-Refer to Table 22-4.Which pairwise voting scheme would result in outcome D?

Accepted Answer

A)   First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D.
B)   First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A.
C)   First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B.
D)   First, choose between C and D. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and A.E) B) and D)
F) A) and B)

Question 7

In corporations,which of the following are agents but not principals?

Accepted Answer

A)   shareholders
B)   the board of directors
C)   managers
D)   workersE) None of the above
F) A) and C)

Question 8

Table 22-14
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 22-14.Mr.Johnson recommends using a vote by majority rule and proposes first choosing between Opryland and the Grand Canyon,then choosing between the winner of the first vote and Sea World,and finally choosing between the winner of the second vote and Disneyland.If everyone votes according to their preferences,

Accepted Answer

A)   the winner of the first vote will be Opryland, the winner of the second vote will be Sea World, and the winner of the final vote will be Disneyland.
B)   the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon, and the winner of the final vote will be Disneyland.
C)   the winner of the first vote will be Grand Canyon, the winner of the second vote will be Sea World, and the winner of the final vote will be Disneyland.
D)   the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon, and the winner of the final vote will be Grand Canyon.E) C) and D)
F) A) and B)

Question 9

In his 1951 book Social Choice and Individual Values,Arrow's perfect voting system satisfies all of the following properties except

Accepted Answer

A)   unanimity.
B)   transitivity.
C)   reflexivity.
D)   independence of irrelevant alternatives.E) None of the above
F) C) and D)

Question 10

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Accepted Answer

A) True 
 B)False

Question 11

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.E) C) and D)
F) B) and C)

Question 12

The problem that arises when one person performs a task on behalf of another person is called

Accepted Answer

A)   the hidden characteristics problem.
B)   the lemons problem.
C)   moral hazard.
D)   adverse selection.E) All of the above
F) A) and B)

Question 13

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 "60-day insurance policy in case of breakage" leaves her glasses out where her new puppy can chew on them.E) C) and D)
F) All of the above

Question 14

Economist Kenneth Arrow wrote a famous book in 1951 in which he took up the question,

Accepted Answer

A)   Is there a perfect voting system?
B)   Are preferences transitive?
C)   Is a dictatorship a good form of government?
D)   Should the president of the United States be elected to a single, six-year term?E) A) and B)
F) None of the above

Question 15

Rick goes to work 8 hours per day,but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams.This is an example of

Accepted Answer

A)   the Condorcet Paradox.
B)   signaling.
C)   moral hazard.
D)   screening.E) None of the above
F) A) and B)

Question 16

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?

Accepted Answer

A)   The percentage of policy holders making claims is higher; average annual premiums are lower.
B)   The percentage of policy holders making claims is lower; average annual premiums are lower.
C)   The percentage of policy holders making claims is higher; average annual premiums are higher.
D)   The percentage of policy holders making claims is lower; average annual premiums are higher.E) A) and C)
F) C) and D)

Question 17

The Condorcet paradox shows that

Accepted Answer

A)   allocations of resources based on majority rule are always inefficient.
B)   problems in counting votes can negate legitimate democratic outcomes.
C)   the order on which things are voted can affect the result.
D)   transitive preferences are inconsistent with rationality.E) All of the above
F) B) and C)

Question 18

Table 22-4
Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
 
-Refer to Table 22-4.Which pairwise voting scheme would result in outcome A?

Accepted Answer

A)   First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D.
B)   First, choose between A and C. Second, voters choose between the winner of the first vote and B. Third, voters choose between the winner of the second vote and D.
C)   First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A.
D)   First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B.E) A) and C)
F) A) and B)

Question 19

An implication of the median voter theorem is that

Accepted Answer

A)   minority views and majority views are given equal weight.
B)   platforms of the major political parties will not differ greatly.
C)   the logic of democracy is fundamentally flawed.
D)   behavioral economics plays a significant role in voting outcomes.E) A) and C)
F) B) and D)

Question 20

If preferences exhibit the property of transitivity,then

Accepted Answer

A)   the preferences are irrational.
B)   individuals prefer more government involvement in private markets than do people whose preferences are not transitive.
C)   preferences change over time more quickly than when preferences are not transitive.
D)   preferences satisfy one of the properties assumed to be desirable by Kenneth Arrow in Social Choice and Individual Values.E) B) and D)
F) B) and C)

Exam 22: Frontiers in Microeconomics.

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $50 will propose that she get $49 and that the other player get $1.By the same reasoning,if the amount to be split is $1000,the player proposing the split will propose that she gets

Correct Answer
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In his 1951 book Social Choice and Individual Values,Arrow's perfect voting system satisfies all of the following properties except

Correct Answer
verified

If preferences exhibit the property of transitivity,then

Correct Answer
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The Condorcet paradox shows that

Correct Answer
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Correct Answer
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Economist Kenneth Arrow wrote a famous book in 1951 in which he took up the question,

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

Correct Answer
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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.

Correct Answer
verified

In corporations,which of the following are agents but not principals?

Correct Answer
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Correct Answer
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The problem that arises when one person performs a task on behalf of another person is called

Correct Answer
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The field of political economy

Correct Answer
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Correct Answer
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Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Correct Answer
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In economics,a difference in access to relevant knowledge is called a(n)

Correct Answer
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Table 22-4 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-4.Which pairwise voting scheme would result in outcome A?

Correct Answer
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An implication of the median voter theorem is that

Correct Answer
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Table 22-4 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-4.Which pairwise voting scheme would result in outcome D?

Correct Answer
verified

Rick goes to work 8 hours per day,but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams.This is an example of

Correct Answer
verified

A woman gives her boyfriend a birthday present.The gift could be viewed by the boyfriend as a

Correct Answer
verified

Exam 22: Frontiers in Microeconomics.

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $50 will propose that she get $49 and that the other player get $1.By the same reasoning,if the amount to be split is $1000,the player proposing the split will propose that she gets

Correct AnswerverifiedShow Answer

In his 1951 book Social Choice and Individual Values,Arrow's perfect voting system satisfies all of the following properties except

Correct AnswerverifiedShow Answer

If preferences exhibit the property of transitivity,then

Correct AnswerverifiedShow Answer

The Condorcet paradox shows that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economist Kenneth Arrow wrote a famous book in 1951 in which he took up the question,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

In corporations,which of the following are agents but not principals?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The problem that arises when one person performs a task on behalf of another person is called

Correct AnswerverifiedShow Answer

The field of political economy

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Most economic models incorporate the assumption of rational behavior on the part of economic actors.

Correct AnswerverifiedShow Answer

In economics,a difference in access to relevant knowledge is called a(n)

Correct AnswerverifiedShow Answer

Table 22-4 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-4.Which pairwise voting scheme would result in outcome A?

Correct AnswerverifiedShow Answer

An implication of the median voter theorem is that

Correct AnswerverifiedShow Answer

Table 22-4 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-4.Which pairwise voting scheme would result in outcome D?

Correct AnswerverifiedShow Answer

Rick goes to work 8 hours per day,but while he is at work he spends most of his time visiting internet sites monitoring his fantasy football teams.This is an example of

Correct AnswerverifiedShow Answer

A woman gives her boyfriend a birthday present.The gift could be viewed by the boyfriend as a

Correct AnswerverifiedShow Answer

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