Question 1

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

Accepted Answer

A)  no voting system is perfect.
B)  only a dictator can produce a desirable social outcome.
C)  the preferences of the wealthy should be given more weight than the preferences of the poor.
D)  the centuries-old Condorcet paradox was not a paradox after all.E) A) and B)
F) A) and C)

Question 2

An example of signaling is a boyfriend giving an expensive, romantic gift to his girlfriend to convey his love for her.

Accepted Answer

A) True 
 B)False

Question 3

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

Accepted Answer

A) True 
 B)False

Question 4

​Suppose there are 3 possible outcomes to a vote: A, B, and C. If voters prefer A to B, B to C, and C to A, which of the following concepts are violated?

Accepted Answer

A)  ​Transitivity
B)  ​Arrow's impossibility theorem
C)  ​Median voter theorem
D)  ​None of the above concepts are violated.E) None of the above
F) All of the above

Question 5

The Condorcet voting paradox applies to situations in which voters

Accepted Answer

A)  decide between exactly two possible outcomes.
B)  decide among more than two possible outcomes.
C)  as a group have transitive preferences.
D)  choose the inferior candidate even though the majority preferred the better candidate.E) C) and D)
F) A) and B)

Question 6

Which of the following relationships involves asymmetric information?

Accepted Answer

A)  An employee is unsure what she will spend her annual performance bonus on.
B)  A loan applicant knows more about the likelihood her business will be successful than the loan officer.
C)  Someone considering buying running shoes looks at a number of online reviews by buyers.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 7

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Accepted Answer

A)  people are overconfident
B)  people give too much weight to a small number of vivid observations
C)  people are reluctant to change their minds
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 8

According to behavioral economics, an employee will likely

Accepted Answer

A)  work harder if she is a satisficer and if she believes a coworker is overpaid.
B)  work harder if she is a satisficer, but work less hard if she believes a coworker is overpaid.
C)  work harder if she believes a coworker is overpaid, but work less hard if she is a satisficer.
D)  work less hard if she is a satisficer and if she believes a coworker is overpaid.E) A) and B)
F) A) and C)

Question 9

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Accepted Answer

A)  The firm cares less about profit and more about cost when there are many competitors in the market.
B)  The firm offers an employee-incentive program in which employees share in the firm's profits.
C)  The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm.
D)  The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.E) A) and B)
F) B) and C)

Question 10

Table 22-22
The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. 
-Refer to Table 22-22. If there is a vote between a budget of $12 million and $16 million, the median voter will vote to spend

Accepted Answer

A)  $12 million and the voting outcome will be $12 million.
B)  $12 million and the voting outcome will be $16 million.
C)  $16 million and the voting outcome will be $12 million.
D)  $16 million and the voting outcome will be $16 million.E) All of the above
F) A) and B)

Question 11

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) All of the above
F) C) and D)

Question 12

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Accepted Answer

A)  the Condorcet Paradox.
B)  signaling.
C)  moral hazard.
D)  screening.E) C) and D)
F) All of the above

Question 13

Which of the following is an attempt to reduce the problem of asymmetric information?

Accepted Answer

A)  When someone is applying for a job, the employer checks references to determine the previous work habits of the applicant.
B)  An insurance company requires people who want to purchase life insurance to take a physical exam.
C)  When someone is considering buying a used car from a dealership, the potential buyer requests documentation of the repair history of the car.
D)  All of the above are correct.E) A) and D)
F) B) and C)

Question 14

An efficiency wage

Accepted Answer

A)  gives an employee an incentive to shirk his duties.
B)  is lower than the equilibrium wage for that position and region.
C)  is higher than the equilibrium wage for that position and region.
D)  both a and b are correct.E) B) and C)
F) A) and D)

Question 15

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

Accepted Answer

A)  The income of waiters and waitresses depends heavily on tips.
B)  An employer pays below equilibrium wages because he thinks his employees are not working as hard as they could be.
C)  The professors leaves the room to prevent cheating on exams.
D)  Tenure professors are not supervised closely.E) B) and C)
F) A) and B)

Question 16

Steve borrowed some money from Summit Bank, telling the loan officer that he intended to use the money to remodel his restaurant. After getting the loan, Steve and his girlfriend immediately took the money and went gambling in Vegas.

Accepted Answer

A)  This is an example of adverse selection since banks have difficulty selecting their customers.
B)  This example does not involve asymmetric information.
C)  From the given information, Steve is the principal and Summit Bank is the agent.
D)  None of the above are correct.E) B) and C)
F) A) and D)

Question 17

​Economists have found that entrepreneurs are likely to have subjective beliefs about the probability of entrepreneurial success that are higher than the actual objective probabilities. These beliefs are most closely related to which of the following behavior concepts?

Accepted Answer

A)  ​People are overconfident.
B)  ​People give too much weight to a small number of vivid observations.
C)  ​People are reluctant to change their minds.
D)  ​People are inconsistent over time.E) All of the above
F) A) and D)

Question 18

Moral hazard and adverse selection are similar asymmetric information problems but moral hazard involves hidden actions while adverse selection involves hidden characteristics.

Accepted Answer

A) True 
 B)False

Question 19

Table 22-22
The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. 
-Refer to Table 22-22. The median voter is one who prefers to spend

Accepted Answer

A)  $12 million.
B)  $16 million
C)  $20 million.
D)  None of the above are correct.E) A) and B)
F) B) and D)

Question 20

When economists assume that people are rational, they assume that

Accepted Answer

A)  consumers maximize profits.
B)  firms maximize revenues.
C)  consumers maximize utility.
D)  firms maximize output.E) A) and D)
F) All of the above

Exam 22: Frontiers in Microeconomics

Which of the following is an attempt to reduce the problem of asymmetric information?

Correct Answer
verified

Suppose there are 3 possible outcomes to a vote: A, B, and C. If voters prefer A to B, B to C, and C to A, which of the following concepts are violated?

Correct Answer
verified

Moral hazard and adverse selection are similar asymmetric information problems but moral hazard involves hidden actions while adverse selection involves hidden characteristics.

Correct Answer
verified

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

Correct Answer
verified

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Correct Answer
verified

Which of the following relationships involves asymmetric information?

Correct Answer
verified

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

Correct Answer
verified

An efficiency wage

Correct Answer
verified

The Condorcet voting paradox applies to situations in which voters

Correct Answer
verified

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. The median voter is one who prefers to spend

Correct Answer
verified

An example of signaling is a boyfriend giving an expensive, romantic gift to his girlfriend to convey his love for her.

Correct Answer
verified

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Correct Answer
verified

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Correct Answer
verified

When economists assume that people are rational, they assume that

Correct Answer
verified

Correct Answer
verified

According to behavioral economics, an employee will likely

Correct Answer
verified

Economists have found that entrepreneurs are likely to have subjective beliefs about the probability of entrepreneurial success that are higher than the actual objective probabilities. These beliefs are most closely related to which of the following behavior concepts?

Correct Answer
verified

Correct Answer
verified

Steve borrowed some money from Summit Bank, telling the loan officer that he intended to use the money to remodel his restaurant. After getting the loan, Steve and his girlfriend immediately took the money and went gambling in Vegas.

Correct Answer
verified

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

Correct Answer
verified

Exam 22: Frontiers in Microeconomics

Which of the following is an attempt to reduce the problem of asymmetric information?

Correct AnswerverifiedShow Answer

​Suppose there are 3 possible outcomes to a vote: A, B, and C. If voters prefer A to B, B to C, and C to A, which of the following concepts are violated?

Correct AnswerverifiedShow Answer

Moral hazard and adverse selection are similar asymmetric information problems but moral hazard involves hidden actions while adverse selection involves hidden characteristics.

Correct AnswerverifiedShow Answer

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

Correct AnswerverifiedShow Answer

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Correct AnswerverifiedShow Answer

Which of the following relationships involves asymmetric information?

Correct AnswerverifiedShow Answer

According to the median voter theorem, majority rule will produce an outcome that is inconsistent with transitive preferences.

Correct AnswerverifiedShow Answer

An efficiency wage

Correct AnswerverifiedShow Answer

The Condorcet voting paradox applies to situations in which voters

Correct AnswerverifiedShow Answer

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. The median voter is one who prefers to spend

Correct AnswerverifiedShow Answer

An example of signaling is a boyfriend giving an expensive, romantic gift to his girlfriend to convey his love for her.

Correct AnswerverifiedShow Answer

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Correct AnswerverifiedShow Answer

People interpret evidence to confirm beliefs they already hold. This statement is an example of which of the following systematic mistakes that people make?

Correct AnswerverifiedShow Answer

When economists assume that people are rational, they assume that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to behavioral economics, an employee will likely

Correct AnswerverifiedShow Answer

​Economists have found that entrepreneurs are likely to have subjective beliefs about the probability of entrepreneurial success that are higher than the actual objective probabilities. These beliefs are most closely related to which of the following behavior concepts?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Steve borrowed some money from Summit Bank, telling the loan officer that he intended to use the money to remodel his restaurant. After getting the loan, Steve and his girlfriend immediately took the money and went gambling in Vegas.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Suppose there are 3 possible outcomes to a vote: A, B, and C. If voters prefer A to B, B to C, and C to A, which of the following concepts are violated?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Economists have found that entrepreneurs are likely to have subjective beliefs about the probability of entrepreneurial success that are higher than the actual objective probabilities. These beliefs are most closely related to which of the following behavior concepts?

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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