Question 1

Your friend works at a coffee shop on campus and regularly gives away free coffee to you and your friends when you visit.In this example,your friend is the

Accepted Answer

A)   principal and the owner of the coffee shop is the agent.
B)   agent and the owner of the coffee shop is the principal.
C)   signaler and the owner of the coffee shop is the screener.
D)   screener and the owner of the coffee ship is the signaler.E) None of the above
F) A) and B)

Question 2

Which of the following is an example of an adverse selection problem?

Accepted Answer

A)   A customer purchases four apples, two of which are bruised.
B)   A card shop puts its Halloween merchandise on sale on November 1st.
C)   A young worker is fired after she is late for work three times in one month.
D)   A man whose father had a heart attack wants to increase his life insurance coverage.E) None of the above
F) B) and C)

Question 3

Riley travels a great deal,and over the past several years he has read dozens of reviews of hotel chains,all of which rave about the clean rooms and great service at Comeon Inns.Last month,Riley checked into a room at a Comeon Inn for the first time,only to find the room filthy and the service lousy.He decided the Comeon Inn chain is inferior to other hotel chains.

Accepted Answer

A)   Riley was irrational to have believed the reviews that he had read.
B)   Riley was rational to have changed his mind about Comeon Inns based on his one experience.
C)   Riley is an example of someone who gives too much weight to a small number of vivid observations.
D)   Riley is an example of someone who is reluctant to change his mind.E) None of the above
F) A) and B)

Question 4

A firm with a very good product

Accepted Answer

A)   has a higher cost of signaling (advertising)  than does a firm with an inferior product.
B)   has more to gain by signaling (advertising)  than does a firm with an inferior product.
C)   does not need to signal (advertise)  because the product's quality speaks for itself.
D)   will signal (advertise)  effectively if signaling is free.E) B) and C)
F) A) and D)

Question 5

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 6

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 B)
F) A) and C)

Question 7

Which of the following is an example of satisficing behavior?

Accepted Answer

A)   You continue studying for your economics exam until you believe you'll get a perfect score.
B)   You spend time looking over the lettuce at the grocery store in order to make sure you get the best head of lettuce.
C)   You briefly clean your room because that's all it takes to get it "clean enough."
D)   You carefully plan your day in order to get "the most out of life."E) C) and D)
F) B) and C)

Question 8

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 diseased trees.Based on the preferences in the table,which of the following statements is correct?

Accepted Answer

A)   Outcome D is preferred to outcome C overall.
B)   Outcome B is preferred to outcome C overall.
C)   Outcome D is preferred to outcome B overall.
D)   Outcome A is preferred to outcome D overall.E) A) and D)
F) None of the above

Question 9

An airline knows that business travelers have more inelastic demand for travel than vacationers.That is,business travelers are often willing to pay more for airline tickets than vacationers.The airline also knows that business travelers do not like to travel over weekends.When customers request airline tickets that do not involve travel over a weekend,the airline determines that a traveler is likely a business traveler and charges a higher price.This is an example of

Accepted Answer

A)   moral hazard.
B)   signaling.
C)   screening.
D)   adverse selection.E) B) and D)
F) A) and B)

Question 10

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

Accepted Answer

A)   the principal conducts an extensive interview of the agent
B)   the principal installs hidden cameras to monitor the agent's behavior
C)   the principal pays the agent efficiency wages
D)   the principal pays the agent a year-end bonusE) A) and B)
F) All of the above

Question 11

An unhealthy person would likely choose a medical insurance policy with a

Accepted Answer

A)   low premium and a high deductible.
B)   high premium and a high deductible.
C)   high premium and no deductible.
D)   The unhealthy person would choose not to be insured.E) B) and D)
F) All of the above

Question 12

Arrow's impossibility theorem demonstrates the impossibility of the median voter theorem.

Accepted Answer

A) True 
 B)False

Question 13

When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Accepted Answer

A)   adverse selection.
B)   a Condorcet paradox.
C)   a screening problem.
D)   a moral hazard problem.E) None of the above
F) C) and D)

Question 14

Table 22-1
Three friends -- Tricia, Sarah, and Katie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: Ireland, Italy, or Greece. They also agree that they will have two pairwise votes to determine where to go on vacation, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the table below.
 
-Refer to Table 22-1.If the first vote pits Ireland against Italy and the second vote pits Greece against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A)   Ireland wins the first vote and Greece wins the second vote, so they go to Greece.
B)   Ireland wins the first vote and Ireland wins the second vote, so they go to Ireland.
C)   Italy wins the first vote and Italy wins the second vote, so they go to Italy.
D)   Italy wins the first vote and Greece wins the second vote, so they go to Greece.E) B) and D)
F) A) and B)

Question 15

Valerie prefers A to B and she prefers B to C.If Valerie's preferences are transitive,then she prefers A to C.

Accepted Answer

A) True 
 B)False

Question 16

One property of Kenneth Arrow's "perfect" voting system is that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.Arrow called this property

Accepted Answer

A)   transitivity.
B)   pairwise perfection.
C)   independence of irrelevant alternatives.
D)   irrelevance of social choices.E) C) and D)
F) A) and C)

Question 17

Which of the following relationships involves asymmetric information?

Accepted Answer

A)   Patients can look up information regarding certain prescription drugs giving them the same information as their doctors.
B)   Consumer Reports allows customers of DVD players to know as much about the quality of various players as the store salesperson.
C)   Car Fax allows car buyers to obtain used-vehicle histories providing them with the same information as the dealership salesperson.
D)   The batter in a baseball game must guess whether the pitcher is going to throw a fastball, curveball, or change-up.E) A) and B)
F) A) and C)

Question 18

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

Accepted Answer

A)   shareholders
B)   the board of directors
C)   managers
D)   workersE) A) and C)
F) A) and D)

Question 19

Table 22-11
The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences.
 
-Refer to Table 22-11.If the vote is conducted using a Borda count where each person's first choice receives 4 points,each person's second choice 3 points,each person's third choice 2 points,and each person's fourth choice 1 point,which alternative would win?

Accepted Answer

A)   W
B)   X
C)   Y
D)   ZE) C) and D)
F) A) and B)

Question 20

Table 22-11
The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences.
 
-Refer to Table 22-11.In a majority vote between alternatives W and X,what percentage of the votes would W receive?

Accepted Answer

A)   35%
B)   45%
C)   55%
D)   65%E) None of the above
F) B) and D)

Exam 22: Frontiers in Microeconomics.

Correct Answer
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Arrow's impossibility theorem demonstrates the impossibility of the median voter theorem.

Correct Answer
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Table 22-11 The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences. -Refer to Table 22-11.In a majority vote between alternatives W and X,what percentage of the votes would W receive?

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

Correct Answer
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Your friend works at a coffee shop on campus and regularly gives away free coffee to you and your friends when you visit.In this example,your friend is the

Correct Answer
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Correct Answer
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Which of the following is an example of satisficing behavior?

Correct Answer
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An unhealthy person would likely choose a medical insurance policy with a

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

Correct Answer
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Correct Answer
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A firm with a very good product

Correct Answer
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One property of Kenneth Arrow's "perfect" voting system is that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.Arrow called this property

Correct Answer
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Which of the following relationships involves asymmetric information?

Correct Answer
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Correct Answer
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When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Correct Answer
verified

Which of the following is an example of an adverse selection problem?

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

Valerie prefers A to B and she prefers B to C.If Valerie's preferences are transitive,then she prefers A to C.

Correct Answer
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Correct Answer
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Exam 22: Frontiers in Microeconomics.

Correct AnswerverifiedShow Answer

Arrow's impossibility theorem demonstrates the impossibility of the median voter theorem.

Correct AnswerverifiedShow Answer

Table 22-11 The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences. -Refer to Table 22-11.In a majority vote between alternatives W and X,what percentage of the votes would W receive?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Your friend works at a coffee shop on campus and regularly gives away free coffee to you and your friends when you visit.In this example,your friend is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of satisficing behavior?

Correct AnswerverifiedShow Answer

An unhealthy person would likely choose a medical insurance policy with a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm with a very good product

Correct AnswerverifiedShow Answer

One property of Kenneth Arrow's "perfect" voting system is that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.Arrow called this property

Correct AnswerverifiedShow Answer

Which of the following relationships involves asymmetric information?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Correct AnswerverifiedShow Answer

Which of the following is an example of an adverse selection problem?

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

Valerie prefers A to B and she prefers B to C.If Valerie's preferences are transitive,then she prefers A to C.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct Answer
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Correct Answer
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