Question 1

Scenario 22-4
Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection.The three choices are: a stoplight,a 4-way stop,and a 2-way stop.The voters are divided into three groups based on their preferences.
Voter Type
 
-Refer to Scenario 22-4.Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting on how to improve the safety of the intersection?

Accepted Answer

A)   The paradox implies that pairwise voting never produces transitive preferences,and so the voting in the town fails to produce transitive preferences.
B)   The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences,but the voting in the town does produce transitive preferences.
C)   The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences,and the voting in the town fails to produce transitive preferences.
D)   The paradox implies that pairwise voting always produces transitive preferences,and so the voting in the town produces transitive preferences.E) B) and C)
F) A) and B)

Question 2

Scenario 22-4
Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection.The three choices are: a stoplight,a 4-way stop,and a 2-way stop.The voters are divided into three groups based on their preferences.
Voter Type
 
-Refer to Scenario 22-4.If the first vote pits a stoplight against a 4-way stop and the second vote pits a 2-way stop against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A)   4-way stop wins the first vote and 4-way stop wins the second vote,so the town installs a 4-way stop.
B)   4-way stop wins the first vote and 2-way stop wins the second vote,so the town installs a 2-way stop.
C)   Stoplight wins the first vote and stoplight wins the second vote,so the town installs a stoplight.
D)   Stoplight wins the first vote and 2-way stop wins the second vote,so the town installs a 2-way stop.E) A) and D)
F) A) and C)

Question 3

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

Accepted Answer

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

Question 4

Scenario 22-2
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 Scenario 22-2.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?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) B) and C)
F) B) and D)

Question 5

Informational asymmetry may apply to a hidden action or hidden characteristic where the informed party may be reluctant to reveal relevant information.

Accepted Answer

A) True 
 B)False

Question 6

The 2001 Nobel prize in economics was awarded to George Akerlof,Michael Spence,and Joseph Stiglitz for their work on

Accepted Answer

A)   asymmetric information.
B)   political economy.
C)   behavioral economics.
D)   growth theory.E) A) and B)
F) B) and C)

Question 7

Suppose that in a Borda count election,outcome X is preferred to outcome Y,and outcome Y is preferred to outcome Z,when outcomes X,Y,and Z are all available options.When Y is removed as an option,however,outcome Z is preferred to outcome X.This would violate Arrow's assumption that voting systems should satisfy

Accepted Answer

A)   unanimity.
B)   transitivity.
C)   the independence of irrelevant alternatives.
D)   no dictators.E) A) and B)
F) A) and C)

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.E) A) and D)
F) None of the above

Question 9

Table 22-9
 
-Refer to Table 22-9.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.E) B) and C)
F) A) and B)

Question 10

Adverse selection may lead to

Accepted Answer

A)   owners of used cars choosing to keep them rather than sell them at the low price that skeptical buyers are willing to pay.
B)   wages being stuck above the level that balances supply and demand,resulting in unemployment.
C)   buyers with low risk choosing to remain uninsured because the policies they are offered fail to reflect their true characteristics.
D)   All of the above are correct.E) A) and B)
F) A) and D)

Question 11

A "satisficer" is a person whose decisionmaking is the same as that predicted by mainstream economic models.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Screening occurs when

Accepted Answer

A)   an informed party acts to reveal his private information.
B)   an informed party acts to conceal his private information.
C)   an uninformed party acts to induce the informed party to reveal private information.
D)   one informed party acts to prevent another informed party from revealing private information.E) A) and B)
F) A) and C)

Question 14

Table 22-3
The citizens of Paradoxopolis will decide whether to build a new school,build a new park,or build a new road.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.
 
-Refer to Table 22-3.Which of the following statements is correct?

Accepted Answer

A)   In a pairwise election,"road" beats "school."
B)   In a pairwise election,"school" beats "park."
C)   In a pairwise election,"park" beats "road."
D)   All of the above are correct.E) A) and D)
F) C) and D)

Question 15

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) None of the above
F) B) and C)

Question 16

Based on the studies of human decision making,which of the following statements is correct?

Accepted Answer

A)   Most people are not bothered by perceived unfairness as long as they receive some compensation,even if the amount is very small.
B)   Most people are very willing to change their minds.
C)   Many people's preferences are inconsistent over time.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 17

Informational asymmetry is a difference in

Accepted Answer

A)   efficiency.
B)   equality.
C)   relevant knowledge.
D)   signaling.E) B) and D)
F) None of the above

Question 18

Table 22-3
The citizens of Paradoxopolis will decide whether to build a new school,build a new park,or build a new road.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.
 
-Refer to Table 22-3.If (1) the first vote pits "school" against "road," and (2) the second vote pits "park" against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A)   "School" wins the first vote and "school" wins the second vote,so they build a school.
B)   "School" wins the first vote and "park" wins the second vote,so they build a park.
C)   "Road" wins the first vote and "road" wins the second vote,so they build a road.
D)   "Road" wins the first vote and "park" wins the second vote,so they build a park.E) C) and D)
F) All of the above

Question 19

According to the median voter theorem,majority rule will

Accepted Answer

A)   always produce an inconclusive outcome.
B)   produce the outcome least preferred by the median voter.
C)   produce the outcome most preferred by the median voter.
D)   produce an outcome that is inconsistent with transitive preferences.E) A) and B)
F) All of the above

Question 20

Scenario 22-4
Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection.The three choices are: a stoplight,a 4-way stop,and a 2-way stop.The voters are divided into three groups based on their preferences.
Voter Type
 
-Refer to Scenario 22-4.If the vote were conducted according to a Borda count system where each person's first choice receives 3 points,second choice 2 points,and third choice 1 point,the result would be

Accepted Answer

A)   a 2-way stop.
B)   a 4-way stop.
C)   a stoplight
D)   a tie between a 2-way stop and a stoplight.E) None of the above
F) B) and D)

Exam 22: Frontiers of Microeconomics

Screening occurs when

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Informational asymmetry may apply to a hidden action or hidden characteristic where the informed party may be reluctant to reveal relevant information.

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The 2001 Nobel prize in economics was awarded to George Akerlof,Michael Spence,and Joseph Stiglitz for their work on

Correct Answer
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Informational asymmetry is a difference in

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

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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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A "satisficer" is a person whose decisionmaking is the same as that predicted by mainstream economic models.

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

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Based on the studies of human decision making,which of the following statements is correct?

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Adverse selection may lead to

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The field of political economy

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According to the median voter theorem,majority rule will

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Exam 22: Frontiers of Microeconomics

Screening occurs when

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Informational asymmetry may apply to a hidden action or hidden characteristic where the informed party may be reluctant to reveal relevant information.

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The 2001 Nobel prize in economics was awarded to George Akerlof,Michael Spence,and Joseph Stiglitz for their work on

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Informational asymmetry is a difference in

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A "satisficer" is a person whose decisionmaking is the same as that predicted by mainstream economic models.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Based on the studies of human decision making,which of the following statements is correct?

Correct AnswerverifiedShow Answer

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Adverse selection may lead to

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The field of political economy

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According to the median voter theorem,majority rule will

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