Question 1

Peter was recently hired as a salesman for a national consulting firm.His job involves spending a significant portion of his time out of the office visiting prospects and attending conferences.His firm is paying him a wage that is higher than the equilibrium wage,but he receives much of his income in quarterly bonuses based on how much he sells.

Accepted Answer

A)   The consulting firm is trying to prevent adverse selection with its compensation strategy.
B)   Peter has an incentive to go golfing with his buddies rather than conducting sales meetings.
C)   The consulting firm is responding to the moral hazard problem with its compensation strategy.
D)   Peter should quit this job and take a job where he gets paid an equilibrium wage more frequently.E) C) and D)
F) B) and D)

Question 2

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow used the term "transitivity" to mean

Accepted Answer

A)   A beats B only if everyone prefers A to B.
B)   if everyone prefers A to B, then A beats B.
C)   if A beats B and B beats C, then A must beat C.
D)   everyone who is eligible to vote must vote; otherwise, the outcome is invalid.E) A) and B)
F) None of the above

Question 3

Bill owns a small business in Milwaukee.He travels frequently,meeting with important customers,and attending conferences.Bill hired Nicole to work in the Milwaukee office as the day-to-day general manager of the business.

Accepted Answer

A)   This is a moral hazard problem since Nicole may not work as hard as Bill would like when she is not monitored.
B)   Bill choosing to hire Nicole is an example of adverse selection since it is possible that Nicole will not work as hard as Bill expects.
C)   Bill will most likely pay Nicole a lower salary than normal since Bill will not be there to monitor Nicole's work effort, and since Nicole will not likely work hard knowing Bill cannot monitor her effort.
D)   The Condorcet Paradox implies that Nicole will not work as hard as Bill would like even though he will likely pay her an above equilibrium wage.E) A) and D)
F) C) and D)

Question 4

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 economicsE) B) and C)
F) A) and D)

Question 5

Students of microeconomic principles often say they are going to study "tonight," because the only way to pass the exam is to study some every night.When "tonight" comes,some students choose to do something else.Come exam day,these students do not do well on their exam.This observation is an example of how people

Accepted Answer

A)   are inconsistent over time.
B)   are consistent over time.
C)   are mainly interested in fairness.
D)   are rational.E) A) and B)
F) A) and C)

Question 6

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Accepted Answer

A) True 
 B)False

Question 7

Researchers have found that the systematic mistakes that people make in their decisionmaking include a lack of confidence in their own abilities.

Accepted Answer

A) True 
 B)False

Question 8

Scenario 22-1
At issue in a particular city vote is how much to spend, per person, on road repair next year. Among the 10,000 voters, 1,500 prefer to spend $300 per person, but no more; 2,800 prefer to spend $450 per person, but no more; 3,500 prefer to spend $800 per person, but no more; and 2,200 prefer to spend $1500 per person, but no more.
-Refer to Scenario 22-1.If there is a vote on whether to spend $800 per person or $1100 per person,the median voter will vote to spend

Accepted Answer

A)   $800 per person and the voting outcome will be $800 per person.
B)   $800 per person and the voting outcome will be $1100 per person.
C)   $1100 per person and the voting outcome will be $800 per person.
D)   $1100 per person and the voting outcome will be $1100 per person.E) A) and C)
F) All of the above

Question 9

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.When the mayor asks the residents to choose between a stoplight and a 4-way stop,the residents choose a 4-way stop.Then,when the mayor asks them to choose between a 4-way stop and a 2-way stop,they choose a 2-way stop.However,if the mayor firsts asks the residents to choose between a 4-way stop and a 2-way stop,they choose a 2-way stop.Then,when the mayor asks the residents to choose between a 2-way stop and a stoplight,they choose a stoplight.What does this example illustrate?

Accepted Answer

A)   Arrow's impossibility theorem
B)   the Condorcet paradox
C)   a Borda count
D)   the median voter theoremE) A) and B)
F) A) and C)

Question 10

Domingo is a contestant on a trivia quiz show.For every state capital he can correctly identify,he will win $1,000.However,before identifying any capitals,he must decide how many he thinks he can correctly identify.If he cannot identify as many as he has wagered,Domingo will not win any money.Suppose Domingo says that he can correctly identify 42 state capitals for a potential payoff of $42,000.According to studies of human decision-making,what is most likely to happen?

Accepted Answer

A)   Domingo will be able to identify 42 state capitals and he will win $42,000.
B)   Domingo will be able to identify fewer than 42 state capitals and will not win any money.
C)   Domingo will not be able to identify any state capitals and will not win any money.
D)   Domingo will choose to save all of the money he wins on the quiz show for his retirement.E) B) and D)
F) All of the above

Question 11

Studies of human decision making reveal several systematic mistakes people make.Which of the following is not an example of one of these mistakes?

Accepted Answer

A)   Pedro bets Michelle that he can name all 50 states in the US, but when he tries he can only name 46.
B)   Kate hears a news report about 5 people dying from a tornado in Kansas and decides to cancel her plans to visit her aunt there.
C)   Randi is a strong proponent of raising the minimum wage. She reads a research report on the effects of increasing the minimum wage and becomes even more sure of her position.
D)   Jenny is shopping for a new car and has found that Hondota cars consistently get high quality ratings. Her friend had trouble with her Hondota but Jenny still decides to purchase a Hondota.E) A) and B)
F) A) and D)

Question 12

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 D)
F) All of the above

Question 13

Borda count is a voting method often used in polls that rank sports teams.

Accepted Answer

A) True 
 B)False

Exam 22: Frontiers in Microeconomics.

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

Correct Answer
verified

Studies of human decision making reveal several systematic mistakes people make.Which of the following is not an example of one of these mistakes?

Correct Answer
verified

Correct Answer
verified

Bill owns a small business in Milwaukee.He travels frequently,meeting with important customers,and attending conferences.Bill hired Nicole to work in the Milwaukee office as the day-to-day general manager of the business.

Correct Answer
verified

Researchers have found that the systematic mistakes that people make in their decisionmaking include a lack of confidence in their own abilities.

Correct Answer
verified

According to the median voter theorem,majority rule will

Correct Answer
verified

Borda count is a voting method often used in polls that rank sports teams.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Correct Answer
verified

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow used the term "transitivity" to mean

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Exam 22: Frontiers in Microeconomics.

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

Correct AnswerverifiedShow Answer

Studies of human decision making reveal several systematic mistakes people make.Which of the following is not an example of one of these mistakes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bill owns a small business in Milwaukee.He travels frequently,meeting with important customers,and attending conferences.Bill hired Nicole to work in the Milwaukee office as the day-to-day general manager of the business.

Correct AnswerverifiedShow Answer

Researchers have found that the systematic mistakes that people make in their decisionmaking include a lack of confidence in their own abilities.

Correct AnswerverifiedShow Answer

According to the median voter theorem,majority rule will

Correct AnswerverifiedShow Answer

Borda count is a voting method often used in polls that rank sports teams.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Correct AnswerverifiedShow Answer

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow used the term "transitivity" to mean

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified