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Exam 22: Frontiers in Microeconomics

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Question 31

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Which of the following sets of preferences can not satisfy the property of transitivity?

A) Plan A is preferred to plan D. Plan D is preferred to plan B. Plan C is preferred to plan B.
B) Plan A is preferred to plan B. Plan B is preferred to plan C. Plan A is preferred to plan C.
C) Plan C is preferred to plan A. Plan B is preferred to plan A. Plan C is preferred to plan B.
D) Plan D is preferred to plan C. Plan C is preferred to plan B. Plan B is preferred to plan D.

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

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Question 32

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The Condorcet paradox shows that there is no scheme for aggregating individual preferences into a valid set of social preferences.

A) True
B) False

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Question 33

Multiple Choice

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If individuals behave irrationally in some circumstances, why do economists typically assume that they behave rationally?​

An implication of the median voter theorem is that, in a race between Republicans and Democrats,

Table 22-9 -Refer to Table 22-9. The table shows the preferences of four types of voters over four possible outcomes: A, B, C, D. In addition, the table shows the percentage of voters of each type. Based on this information, which of the following statements is false?

The majority of Americans, when asked how many states they could name, think they could name all fifty. However, when they are asked to do so, very few are able to come up with all fifty. This is an example of which systematic mistake that people make?

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. If the family uses a Borda count to make their decision, what is their vacation destination?

A person's tendency to smoke a cigarette after promising himself that he will quit is an example of the behavioral economics insight that people are inconsistent over time

Arrow's impossibility theorem is "disturbing" in the sense that it proves that

Which of the following is an example of informational asymmetry?

Table 22-11 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 22-11. If the vote were conducted according to a modified Borda count system where each person's first choice receives 10 points, second choice 5 points, third choice 3 points and fourth choice 1 point, the result would be that

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

Which of the following is not an example of a principal trying to solve the moral-hazard problem? The principal

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

The median voter's preferred outcome is the same as the

The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

Table 22-23 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. -Refer to Table 22-23. If the town administrator asks the people to first choose between cutting the arts program and turning off half of the streetlights, and then choose between the winner of the first election and reducing police patrols, and then choose between the winner of the second election and increasing taxes, which option will win each vote?

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 relationships involves asymmetric information?

On car insurance policies, Countrywide Insurance Company offers drivers an option: Policy 1 features a deductible of $1,000, and it requires a driver to pay an annual premium of $500. Policy 2 features a deductible of $250, and it requires a driver to pay an annual premium of $1,000.