Question 1

When the buyer knows less than the seller about the characteristics of the good being sold,there is

Accepted Answer

A)   a principal-agent problem.
B)   a moral hazard problem.
C)   an adverse selection problem.
D)   a signaling problem.E) B) and D)
F) A) and D)

Question 2

Table 22-2
Three longtime friends-Jack,Ryan,and Colin-are deciding how they will spend their Sunday afternoon.They all agree that they should do one of three things: go to a movie,go to the zoo,or go to a museum.They also agree that they will have two pairwise votes to determine how to spend their evening,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 22-2.If Jack,Ryan,and Colin use a Borda count,rather than pairwise majority voting,to decide how to spend their afternoon,then they will go to

Accepted Answer

A)   a movie.
B)   the zoo.
C)   a baseball game.
D)   None of the above is correct;a Borda count fails to produce a winner in this instance.E) B) and C)
F) A) and D)

Question 3

The Condorcet paradox shows that

Accepted Answer

A)   allocations of resources based on majority rule are always inefficient.
B)   problems in counting votes can negate legitimate democratic outcomes.
C)   the order on which things are voted can affect the result.
D)   transitive preferences are inconsistent with rationality.E) A) and C)
F) None of the above

Question 4

Employers can try to overcome the moral-hazard problem involving their employees by

Accepted Answer

A)   paying their employees more often.
B)   paying their employees below-equilibrium wages since the employees will likely shirk some of their responsibilities.
C)   better monitoring their employees' work efforts.
D)   requiring their employees to take a pre-employment work effort test.E) All of the above
F) A) and B)

Question 5

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

Accepted Answer

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 C)
F) All of the above

Question 6

Table 22-14
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 22-14.If Mr.Johnson wants to ensure that his 1st choice becomes the family's winning destination,he should propose

Accepted Answer

A)   using a vote by majority rule and first choosing between Opryland and the Grand Canyon,then choosing between the winner of the first vote and Sea World,and finally choosing between the winner of the second vote and Disneyland.
B)   using a vote by majority rule and first choosing between Disneyland and Sea World,then choosing between the winner of the first vote and the Grand Canyon and finally choosing between the winner of the second vote and the Opryland.
C)   using a vote by majority rule and first choosing between Sea World and the Grand Canyon,then choosing between the winner of the first vote and Disneyland,and finally choosing between the winner of the second vote and Opryland.
D)   using a Borda count.E) A) and B)
F) B) and C)

Question 7

The field of political economy applies the methods of

Accepted Answer

A)   psychology to study how the economy works.
B)   political science to study how the economy works
C)   economics to study how government works.
D)   psychology to study how government works.E) None of the above
F) B) and C)

Question 8

Because people with hidden health problems are more likely to buy health insurance than are other people,

Accepted Answer

A)   the price of health insurance reflects the costs of a sicker-than-average person.
B)   the price of health insurance is too low,relative to the socially-optimal price.
C)   people in average health may be encouraged to buy too much health insurance,relative to the socially-optimal quantity.
D)   the Condorcet Paradox suggests that people who are sicker than average will ultimately buy more health insurance.E) All of the above
F) B) and C)

Question 9

The Condorcet paradox

Accepted Answer

A)   proved that the Arrow impossibility theorem is wrong.
B)   was proved wrong by the Arrow impossibility theorem.
C)   serves as an example of the Arrow impossibility theorem.
D)   pertains to voting systems,whereas Arrow's Impossibility Theorem does not.E) A) and B)
F) A) and C)

Question 10

Table 22-2
Three longtime friends-Jack,Ryan,and Colin-are deciding how they will spend their Sunday afternoon.They all agree that they should do one of three things: go to a movie,go to the zoo,or go to a museum.They also agree that they will have two pairwise votes to determine how to spend their evening,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 22-2.If (1) the first vote pits "baseball game" against "zoo," and (2) the second vote pits "movie" against the winner of the first vote,then

Accepted Answer

A)   "Baseball game" wins the first vote and "baseball game" wins the second vote,so they go to a baseball game.
B)   "Baseball game" wins the first vote and "movie" wins the second vote,so they go to a movie.
C)   "Zoo" wins the first vote and "zoo" wins the second vote,so they go to the zoo.
D)   "Zoo" wins the first vote and "movie" wins the second vote,so they go to a movie.E) B) and C)
F) A) and D)

Question 11

Which of the following is not correct?

Accepted Answer

A)   Pairwise voting never produces transitive preferences.
B)   The order of pairwise voting can affect the result.
C)   Majority voting by itself does not tell us what outcome a society really wants.
D)   No voting system can satisfy all of the following properties: unanimity,transitivity,independence of irrelevant alternatives,and no dictators.E) C) and D)
F) A) and B)

Question 12

A driver knows more than his auto insurer about how cautiously he drives.This is an example of

Accepted Answer

A)   a hidden action.
B)   a hidden characteristic.
C)   adverse selection.
D)   the Condorcet Paradox.E) B) and D)
F) A) and C)

Question 13

Suppose you are covered under health insurance or belong to a Health Maintenance Organization (HMO) ,and you are insured against all or most of the costs of visits to the doctor.As a result you are likely to make greater use of medical services of all kinds.This tendency of people with insurance to change their behavior in a way that leads to more claims against the insurance company is called

Accepted Answer

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

Question 14

Which of the following frontier fields of economics identifies that people do not always act rationally?

Accepted Answer

A)   asymmetric information
B)   political economy
C)   behavioral economics
D)   existential economicsE) C) and D)
F) A) and C)

Question 15

The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

Accepted Answer

A) True 
 B)False

Question 16

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 17

The problem that results from an agent,who is imperfectly monitored by the principal,engaging in dishonest or otherwise undesirable behavior is called

Accepted Answer

The answer of The problem that results from an agent,who...

Question 18

Table 22-6
 
-Refer to Table 22-6.The table shows the preferences for three types of voters over three possible outcomes: A,B,and C.The table also shows the percentage of voters of each type.Based on this information,which of the following statements is true?

Accepted Answer

A)   In a vote between B and C,C loses since only the Type 1 voters prefer C to B.
B)   In a vote between A and B,B wins getting 85% of the total vote.
C)   In a vote between A and C,C loses getting only 45% of the total vote.
D)   Both a and bE) A) and C)
F) A) and D)

Question 19

Table 22-15
The town of Portsmouth is considering a renovation to the high school.The voters in Portsmouth have different preferences on the budget for the renovation as displayed below.
 
-Refer to Table 22-15.If there is a vote between a budget of $8 million and $12 million,the median voter will vote to spend

Accepted Answer

A)   $8 million and the voting outcome will be $8 million.
B)   $8 million and the voting outcome will be $12 million.
C)   $12 million and the voting outcome will be $8 million..
D)   $12 million and the voting outcome will be $12 million.E) All of the above
F) B) and C)

Question 20

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 A?

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 A and C.Second,voters choose between the winner of the first vote and B.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) None of the above
F) A) and B)

Exam 22: Frontiers of Microeconomics

Employers can try to overcome the moral-hazard problem involving their employees by

Correct Answer
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Which of the following frontier fields of economics identifies that people do not always act rationally?

Correct Answer
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A driver knows more than his auto insurer about how cautiously he drives.This is an example of

Correct Answer
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The field of political economy applies the methods of

Correct Answer
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Which of the following is not correct?

Correct Answer
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Table 22-6 -Refer to Table 22-6.The table shows the preferences for three types of voters over three possible outcomes: A,B,and C.The table also shows the percentage of voters of each type.Based on this information,which of the following statements is true?

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The Condorcet paradox

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When the buyer knows less than the seller about the characteristics of the good being sold,there is

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The Condorcet paradox shows that

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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 A?

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Because people with hidden health problems are more likely to buy health insurance than are other people,

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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?

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

Correct Answer
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The problem that results from an agent,who is imperfectly monitored by the principal,engaging in dishonest or otherwise undesirable behavior is called

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The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

Correct Answer
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Exam 22: Frontiers of Microeconomics

Employers can try to overcome the moral-hazard problem involving their employees by

Correct AnswerverifiedShow Answer

Which of the following frontier fields of economics identifies that people do not always act rationally?

Correct AnswerverifiedShow Answer

A driver knows more than his auto insurer about how cautiously he drives.This is an example of

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The field of political economy applies the methods of

Correct AnswerverifiedShow Answer

Which of the following is not correct?

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Table 22-6 -Refer to Table 22-6.The table shows the preferences for three types of voters over three possible outcomes: A,B,and C.The table also shows the percentage of voters of each type.Based on this information,which of the following statements is true?

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The Condorcet paradox

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When the buyer knows less than the seller about the characteristics of the good being sold,there is

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The Condorcet paradox shows that

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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 A?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because people with hidden health problems are more likely to buy health insurance than are other people,

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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

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The problem that results from an agent,who is imperfectly monitored by the principal,engaging in dishonest or otherwise undesirable behavior is called

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The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

Correct AnswerverifiedShow Answer

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