Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Table 22-2
A high school Spanish class and their teacher are planning to take a Spring Break trip abroad but they have to decide where to go.They have narrowed the options to: Spain,Mexico,Ecuador,and Costa Rica.The voters' preferences are shown in the table below.
 
-Refer to Table 22-2.If the election is conducted by instant runoff,the first votes to be reassigned will be the first choice votes of

Accepted Answer

A)   Costa Rica.
B)   Spain.
C)   Mexico.
D)   Ecuador.E) C) and D)
F) None of the above

Question 3

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 4

Which of the following sets of preferences satisfies the property of transitivity?

Accepted Answer

A)   Cookies are preferred to brownies.Brownies are preferred to ice cream.Ice cream is preferred to cookies.
B)   Cookies are preferred to pie.Brownies are preferred to pie.Pie is preferred to cookies.
C)   Cookies are preferred to ice cream.Ice cream is preferred to brownies.Cookies are preferred to brownies.
D)   Cookies are preferred to pie.Ice cream is preferred to cookies.Pie is preferred to ice cream.E) A) and B)
F) A) and C)

Question 5

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)   signalingE) All of the above
F) A) and B)

Question 6

The results of the ultimatum game illustrate the fact that

Accepted Answer

A)   people's behavior is often driven by an innate sense of fairness.
B)   homo economicus is a good description of people's behavior.
C)   self-interest brings out the most efficient economic outcome.
D)   Both b and c are correct.E) A) and B)
F) None of the above

Question 7

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.Based on the information in the table,which of the following statements is true?

Accepted Answer

A)   In a vote between a 2-way stop and a stoplight,stoplight wins because 40% of voters have stoplight as their 1st choice.
B)   In a vote between a 2-way stop and a 4-way stop,the 4-way stop wins getting 80% of the total vote.
C)   In a vote between a 4-way stop and a stoplight,there is a tie because each gets 40% of the vote.
D)   None of the above are true.E) A) and D)
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.Suppose that before the family can arrive at their decision,Opryland announced that it will be closed for the season due to flooding.Mr.Johnson recommends using a vote by majority rule and proposes first choosing between the Grand Canyon and Sea World,and then choosing between the winner of the first vote and Disneyland.If everyone votes according to their preferences,

Accepted Answer

A)   the winner of the first vote will be Sea World,the winner of the second vote will be Disneyland.
B)   the winner of the first vote will be Sea World,the winner of the second vote will be Grand Canyon.
C)   the winner of the first vote will be Grand Canyon,the winner of the second 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.E) All of the above
F) None of the above

Question 9

Table 22-3
The citizens of Anytown will decide whether to build a new library,a new community center,or a new ice rink.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 the citizens of Anytown use a Borda count,rather than pairwise majority voting,to decide what to build,then they will build a new

Accepted Answer

A)   library.
B)   community center.
C)   ice rink.
D)   None of the above is correct;a Borda count fails to produce a winner in this instance.E) A) and D)
F) A) and B)

Question 10

The Arrow impossibility theorem shows that

Accepted Answer

A)   democracy should be abandoned as a form of government.
B)   it is impossible to improve upon democratic voting methods as a mechanism for social choice.
C)   all voting systems are flawed as a mechanism for social choice.
D)   the median voter's preferences will always win in a two-way vote.E) A) and B)
F) B) and C)

Question 11

Table 22-15
The town of Portsmouth is considering a renovation to the high school.The voters in Portsmouth have different preferences on the budget for the renovation as displayed below.
 
-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.E) B) and C)
F) A) and D)

Question 12

Table 22-5
The 500 voters of Appleton are deciding by majority rule how much to spend on a new library.
 
-Refer to Table 22-5.The median voter prefers to spend

Accepted Answer

A)   $2 million.
B)   $2.57 million.
C)   $3 million.
D)   $4 million.E) C) and D)
F) None of the above

Question 13

A mother gives her teenage daughter two choices: spend 20 minutes cleaning her room today or spend 25 minutes cleaning her room tomorrow.The same mother gives her same daughter two additional choices: clean out the garage for 20 minutes next Tuesday or 25 minutes next Wednesday.According to economic theory,

Accepted Answer

A)   if the daughter chooses to procrastinate,she is behaving irrationally.
B)   the daughter will likely choose to clean out her room tomorrow but clean out the garage next Tuesday.
C)   the daughter will likely choose to clean out her room tomorrow and clean out the garage next Wednesday.
D)   if the daughter chooses to procrastinate,she is exhibiting satisficing behavior.E) A) and D)
F) All of the above

Question 14

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) B) and C)
F) C) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

Assume there are two major political parties: the Conservatives and the Liberals.What does the median voter theorem imply about the nature of the platforms (that is,policy stances)of the Conservatives and Liberals?

Accepted Answer

The median voter theorem implies that po...

Question 18

A safe driver would likely choose an auto insurance policy with a

Accepted Answer

A)   low premium and a high deductible.
B)   high premium and a high deductible.
C)   high premium and a low deductible.
D)   high premium and no deductible.E) B) and D)
F) C) and D)

Question 19

Table 22-16
Citizens in a small town are deciding how best to develop a plot of land at the center of town.They have narrowed the options to: a park,town hall,gas station,restaurant.The voters' preferences are shown in the table below.
 
-Refer to Table 22-16.If the election is conducted by instant runoff,the election winner will be

Accepted Answer

A)   park.
B)   restaurant.
C)   town hall.
D)   gas station.E) None of the above
F) A) and B)

Question 20

Which of the following events best exemplifies the concept of signaling?

Accepted Answer

A)   A college student's parents,having learned that their child is short of money,send her a check for $1,000.
B)   A woman,who is trying to win the love of a certain man,buys him a very personal gift.
C)   A grocery store maintains a policy of examining the driver's license of everyone who writes a personal check to purchase his groceries.
D)   A university maintains a policy of considering for admission only those students who graduated among the top ten percent of their high school class.E) A) and D)
F) C) and D)

Exam 22: Frontiers of Microeconomics

The Arrow impossibility theorem shows that

Correct Answer
verified

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?

Correct Answer
verified

A safe driver would likely choose an auto insurance policy with a

Correct Answer
verified

Which of the following events best exemplifies the concept of signaling?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Assume there are two major political parties: the Conservatives and the Liberals.What does the median voter theorem imply about the nature of the platforms (that is,policy stances)of the Conservatives and Liberals?

Correct Answer
verified
The median voter theorem implies that po...
View Answer

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Table 22-15 The town of Portsmouth is considering a renovation to the high school.The voters in Portsmouth have different preferences on the budget for the renovation as displayed below. -Economic theory assumes that voters,politicians,and other political participants are largely motivated by

Correct Answer
verified

Table 22-5 The 500 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-5.The median voter prefers to spend

Correct Answer
verified

The results of the ultimatum game illustrate the fact that

Correct Answer
verified

Which of the following sets of preferences satisfies the property of transitivity?

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

The Arrow impossibility theorem shows that

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

A safe driver would likely choose an auto insurance policy with a

Correct AnswerverifiedShow Answer

Which of the following events best exemplifies the concept of signaling?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Assume there are two major political parties: the Conservatives and the Liberals.What does the median voter theorem imply about the nature of the platforms (that is,policy stances)of the Conservatives and Liberals?

Correct AnswerverifiedThe median voter theorem implies that po...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Table 22-15 The town of Portsmouth is considering a renovation to the high school.The voters in Portsmouth have different preferences on the budget for the renovation as displayed below. -Economic theory assumes that voters,politicians,and other political participants are largely motivated by

Correct AnswerverifiedShow Answer

Table 22-5 The 500 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-5.The median voter prefers to spend

Correct AnswerverifiedShow Answer

The results of the ultimatum game illustrate the fact that

Correct AnswerverifiedShow Answer

Which of the following sets of preferences satisfies the property of transitivity?

Correct AnswerverifiedShow Answer

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The median voter theorem implies that po...
View Answer

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