Question 1

A woman gives her boyfriend a birthday present.The gift could be viewed by the boyfriend as a

Accepted Answer

A)   moral hazard problem.
B)   screening device.
C)   signal of how much she cares for him.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 2

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

Question 3

In the case of a moral-hazard problem,which of the following is not a way for the principal to encourage the agent to act more responsibly?

Accepted Answer

A)   the principal could better monitor the agent
B)   the principal could pay the agent above-equilibrium wages
C)   the principal could delay payment to the agent
D)   the principal could pay the agent below-equilibrium wagesE) B) and C)
F) None of the above

Question 4

Which of the following students exhibits satisficing behavior?

Accepted Answer

A)   Alex studies his economics notes every night so that he can be sure to earn a perfect score on his exam.
B)   Brody studies his economics notes for a few hours the night before the test because he will be satisfied with a C on his exam.
C)   Camilla studies extensively as she will only be satisfied with a very high score.
D)   None of these students exhibits satisficing behavior.E) B) and C)
F) All of the above

Question 5

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

Question 6

When each voter has a most-preferred outcome for the expenditure on a particular government program,majority rule will produce the outcome

Accepted Answer

A)   preferred by the mean (average) voter.
B)   preferred by the median voter.
C)   that causes the political party in power to increase its power.
D)   defined by Arrow's Impossibility Theorem.E) All of the above
F) A) and C)

Question 7

A survey of 1,500 frequent restaurant patrons revealed that,Julio's,a local Mexican restaurant offers high-quality food at low prices.Based on one dining experience,a restaurant critic gave Julio's a poor review,saying the food was not very good.As a result,you decide not to dine at Julio's.This decision is an example of which of the following systematic mistakes that people make when making decisions?

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

Question 8

Table 22-6
 
-Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: X,Y,and Z.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is true?

Accepted Answer

A)   As the Condorcet Paradox predicts,majority rule fails to produce transitive preferences for society.
B)   As Arrow's Impossibility Theorem demonstrates,it is impossible from this information to determine which outcome the voters prefer.
C)   The median voter theorem allows us to conclude that in a vote between X and Y,Y will win since the Type 2 voter is the median voter.
D)   While the Condorcet Paradox predicts that majority rule may not produce transitive preferences for society as a whole,society's preferences in this case are transitive.E) None of the above
F) A) and B)

Question 9

Table 22-7
 
-Refer to Table 22-7.The table shows the most preferred budget of 75 voters.In an election,each voter will select the budget closest to his or her most preferred budget.Which of the following statements regarding this information is true?

Accepted Answer

A)   In an election between a $33 budget and a $37 budget,the $33 budget will win.
B)   Since the median voter theorem implies that the budget of the median voter will win the election,we would expect the overall best budget to be $25,the median of the available budgets.
C)   In an election between a $10 budget and a $40 budget,the $40 budget will win.
D)   Both b and cE) A) and B)
F) B) and D)

Question 10

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 C)
F) B) and D)

Question 11

Studies of human decision-making show that

Accepted Answer

A)   firms are less likely to maximize profits than consumers are to maximize utility.
B)   firms are more likely to maximize profits than consumers are to maximize utility.
C)   people are irrational more often than they are rational.
D)   people are reluctant to change their minds.E) B) and C)
F) A) and B)

Question 12

Table 22-4
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 22-4.Which pairwise voting scheme would result in outcome B?

Accepted Answer

A)   First,choose between A and B.Second,voters choose between the winner of the first vote and C.Third,voters choose between the winner of the second vote and D.
B)   First,choose between B and C.Second,voters choose between the winner of the first vote and A.Third,voters choose between the winner of the second vote and D.
C)   First,choose between B and D.Second,voters choose between the winner of the first vote and C.Third,voters choose between the winner of the second vote and A.
D)   First,choose between C and D.Second,voters choose between the winner of the first vote and A.Third,voters choose between the winner of the second vote and B.E) B) and C)
F) None of the above

Question 13

Which of the following is an example of informational asymmetry?

Accepted Answer

A)   A seller of a house knows more about its true condition than does a potential buyer.
B)   A salesperson knows more about her efforts than does her manager.
C)   A child knows more about how much time he spent playing video games while he was alone in his bedroom than do his parents.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget.Which of the following statements is true?

Accepted Answer

A)   The Condorcet Paradox predicts that the $100 budget will win even though fewer people prefer that budget.
B)   The median voter theorem predicts that the winning budget will be $125,the median of the preferences of the two types of voters.
C)   Arrow's impossibility theorem says that the winning budget cannot be determined in this election since there is no unanimity.
D)   None of the above.E) A) and B)
F) A) and C)

Question 15

Which of the following would be an example of a principal trying to deal with a moral hazard problem?

Accepted Answer

A)   The parents of an infant secretly place video cameras in their house before the baby-sitter arrives.
B)   An insurance company checks police records to determine if its policyholders have received traffic citations.
C)   An employer examines his workers' output on a daily basis.
D)   All of the above are correct.E) A) and C)
F) None of the above

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) A) and B)

Question 17

A brand of wine is priced at only $5 per bottle,far below the market price of most high quality wines.Before any reputation exists for the wine,consumers buy very little of this inexpensive wine because they interpret the low price to mean that the wine is of poor quality.The company decides to change the label on the wine to show that it has won awards for quality.This label change is an example of

Accepted Answer

A)   signaling.
B)   screening.
C)   selecting.
D)   All of the above are correct.E) A) and C)
F) C) and D)

Question 18

As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.This voting method is called a(n)

Accepted Answer

A)   median vote.
B)   pairwise minority vote.
C)   Borda count.
D)   Arrow count.E) B) and C)
F) None of the above

Question 19

Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth.

Accepted Answer

A) True 
 B)False

Question 20

The temptation of imperfectly-monitored workers to shirk their responsibilities is

Accepted Answer

A)   an example of the moral hazard problem.
B)   an example of the adverse selection problem.
C)   an example of screening.
D)   an example of signaling.E) B) and C)
F) B) and D)

Exam 22: Frontiers of Microeconomics

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget.Which of the following statements is true?

Correct Answer
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When each voter has a most-preferred outcome for the expenditure on a particular government program,majority rule will produce the outcome

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

Correct Answer
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Which of the following is an example of informational asymmetry?

Correct Answer
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Which of the following would be an example of a principal trying to deal with a moral hazard problem?

Correct Answer
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As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.This voting method is called a(n)

Correct Answer
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Studies of human decision-making show that

Correct Answer
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The temptation of imperfectly-monitored workers to shirk their responsibilities is

Correct Answer
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Table 22-6 -Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: X,Y,and Z.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is true?

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

Correct Answer
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Table 22-4 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 22-4.Which pairwise voting scheme would result in outcome B?

Correct Answer
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Correct Answer
verified

Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth.

Correct Answer
verified

Which of the following students exhibits satisficing behavior?

Correct Answer
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In the case of a moral-hazard problem,which of the following is not a way for the principal to encourage the agent to act more responsibly?

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

Table 22-7 -Refer to Table 22-7.The table shows the most preferred budget of 75 voters.In an election,each voter will select the budget closest to his or her most preferred budget.Which of the following statements regarding this information is true?

Correct Answer
verified

A woman gives her boyfriend a birthday present.The gift could be viewed by the boyfriend as a

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget.Which of the following statements is true?

Correct AnswerverifiedShow Answer

When each voter has a most-preferred outcome for the expenditure on a particular government program,majority rule will produce the outcome

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is an example of informational asymmetry?

Correct AnswerverifiedShow Answer

Which of the following would be an example of a principal trying to deal with a moral hazard problem?

Correct AnswerverifiedShow Answer

As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.This voting method is called a(n)

Correct AnswerverifiedShow Answer

Studies of human decision-making show that

Correct AnswerverifiedShow Answer

The temptation of imperfectly-monitored workers to shirk their responsibilities is

Correct AnswerverifiedShow Answer

Table 22-6 -Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: X,Y,and Z.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 22-4 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 22-4.Which pairwise voting scheme would result in outcome B?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth.

Correct AnswerverifiedShow Answer

Which of the following students exhibits satisficing behavior?

Correct AnswerverifiedShow Answer

In the case of a moral-hazard problem,which of the following is not a way for the principal to encourage the agent to act more responsibly?

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

Table 22-7 -Refer to Table 22-7.The table shows the most preferred budget of 75 voters.In an election,each voter will select the budget closest to his or her most preferred budget.Which of the following statements regarding this information is true?

Correct AnswerverifiedShow Answer

A woman gives her boyfriend a birthday present.The gift could be viewed by the boyfriend as a

Correct AnswerverifiedShow Answer

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