Question 1

​Which of the following frontier areas of microeconomics applies economic tools to the study of government (or public) choice?

Accepted Answer

A) ​Political economy 
B) ​Behavioral economics 
C) ​Game theory 
D) ​Industrial organization 
A) ​Political economy 
B) ​Behavioral economics 
C) ​Game theory 
D) ​Industrial organization

Question 2

​The median voter theorem states that

Accepted Answer

A) ​the median voter will never hold the decisive vote in an election. 
B) ​policies that are enacted will be least preferable to the median voter. 
C) ​the median voter will hold the decisive vote in an election. 
D) ​policies that are enacted will be most preferred by the median voter. 
A) ​the median voter will never hold the decisive vote in an election. 
B) ​policies that are enacted will be least preferable to the median voter. 
C) ​the median voter will hold the decisive vote in an election. 
D) ​policies that are enacted will be most preferred by the median voter.

Question 3

An action taken by an informed party to reveal private information to an uninformed party is called

Accepted Answer

The answer of An action taken by an informed party...

Question 4

The moral-hazard problem and the desire of firms to lessen that problem serve as a plausible explanation for a firm paying above-equilibrium wages to its workers.

Accepted Answer

A) True 
 B)False

Question 5

According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time

Accepted Answer

A) is rational behavior. 
B) likely occurs because saving requires a sacrifice in the present for a reward in the distant future. 
C) likely occurs because Americans don't care about retirement. 
D) definitely would not happen if Americans earned a greater return on their investments. 
A) is rational behavior. 
B) likely occurs because saving requires a sacrifice in the present for a reward in the distant future. 
C) likely occurs because Americans don't care about retirement. 
D) definitely would not happen if Americans earned a greater return on their investments.

Question 6

In corporations, a principal-agent problem can arise when

Accepted Answer

A) the shareholders are the principal and the managers are the agent. 
B) the board of directors is the principal and the managers are the agent. 
C) the shareholders are the principal and the board of directors is the agent. 
D) All of the above are correct. 
A) the shareholders are the principal and the managers are the agent. 
B) the board of directors is the principal and the managers are the agent. 
C) the shareholders are the principal and the board of directors is the agent. 
D) All of the above are correct.

Question 7

Arrow's impossibility theorem states that the majority rule fails to produce transitive preferences for society.

Accepted Answer

A) True 
 B)False

Question 8

Scenario 22-3
​
At issue in a particular city vote is how much to spend, per person, on road repair next year. Among the 10,000 voters, 2,900 prefer to spend $500 per person, but no more; 2,200 prefer to spend $600 per person, but no more; 1,900 prefer to spend $800 per person, but no more; 1,600 prefer to spend $1,200 but no more, and 1,400 prefer to spend $1,400 per person, but no more.
-Refer to Scenario 22-3. The median voter is one who prefers to spend

Accepted Answer

A) $500. 
B) $600. 
C) $800. 
D) None of the above are correct. 
A) $500. 
B) $600. 
C) $800. 
D) None of the above are correct.

Question 9

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

Accepted Answer

A) Is there a perfect voting system? 
B) Are preferences transitive? 
C) Is a dictatorship a good form of government? 
D) Does Democracy work? 
A) Is there a perfect voting system? 
B) Are preferences transitive? 
C) Is a dictatorship a good form of government? 
D) Does Democracy work?

Question 10

When some people are better informed than others and the imbalance affects the choices they make, economists say there is

Accepted Answer

asymmetric

Question 11

Severe adverse-selection problems may result in

Accepted Answer

A) too few good used cars being offered for sale. 
B) wages that are too low relative to equilibrium levels. 
C) too many good drivers buying too much automobile insurance. 
D) people with average health buying too much health insurance. 
A) too few good used cars being offered for sale. 
B) wages that are too low relative to equilibrium levels. 
C) too many good drivers buying too much automobile insurance. 
D) people with average health buying too much health insurance.

Question 12

Table 22-17  
-Refer to Table 22-17. 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 b. 
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 b.

Question 13

Table 22-14
Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired.   '
-Refer to Table 22-14. What would the results of a Borda Count vote be?

Accepted Answer

A) Adams and Brown tie. 
B) Adams wins. 
C) Brown wins. 
D) Campbell wins. 
A) Adams and Brown tie. 
B) Adams wins. 
C) Brown wins. 
D) Campbell wins.

Question 14

Which of the following is an example of screening?

Accepted Answer

A) A lender checks a loan applicants credit history. 
B) When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C) When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not. 
D) All of the above are correct. 
A) A lender checks a loan applicants credit history. 
B) When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. 
C) When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not. 
D) All of the above are correct.

Question 15

Table 22-19
The 600 voters of Appleton are deciding by majority rule how much to spend on a new library.  
-Refer to Table 22-19. If an election were held between spending $2 million and $4 million, the median voter would vote for

Accepted Answer

A) $2 million and $2 million would win. 
B) $2 million and $3 million would win. 
C) $4 million and $2 million would win. 
D) $4 million and $4 million would win. 
A) $2 million and $2 million would win. 
B) $2 million and $3 million would win. 
C) $4 million and $2 million would win. 
D) $4 million and $4 million would win.

Question 16

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums. This practice is best described as an example of

Accepted Answer

A) screening. 
B) behavioral economics. 
C) monitoring. 
D) signaling. 
A) screening. 
B) behavioral economics. 
C) monitoring. 
D) signaling.

Question 17

Table 22-15
Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below.  
-Refer to Table 22-15. If elections were held where voters choose either Beth or Mary, and then choose either the winner or Fred, what would the results be?

Accepted Answer

A) Beth would win both elections. 
B) Beth would win the first election and Fred would win the second election. 
C) Mary would win the first and second elections. 
D) Mary would win the first election and Fred would win the second election. 
A) Beth would win both elections. 
B) Beth would win the first election and Fred would win the second election. 
C) Mary would win the first and second elections. 
D) Mary would win the first election and Fred would win the second election.

Question 18

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

Accepted Answer

A) ​The assumption of rationality allows economists to make powerful statements that apply the majority of the time. 
B) ​The assumption of rationality was used before psychologists discovered ways in which individuals behave irrationally. 
C) ​The assumption of rationality is used because economists do not understand principles of psychology. 
D) ​The assumption of rationality has yet to be refuted with scientific evidence. 
A) ​The assumption of rationality allows economists to make powerful statements that apply the majority of the time. 
B) ​The assumption of rationality was used before psychologists discovered ways in which individuals behave irrationally. 
C) ​The assumption of rationality is used because economists do not understand principles of psychology. 
D) ​The assumption of rationality has yet to be refuted with scientific evidence.

Question 19

Which of the following is not a common response to the moral hazard problem that employers face?

Accepted Answer

A) offering all employees some funding for additional education 
B) paying efficiency wages 
C) requiring employees to provide itemized receipts for reimbursable expenses 
D) paying year-end bonuses rather than higher monthly earnings 
A) offering all employees some funding for additional education 
B) paying efficiency wages 
C) requiring employees to provide itemized receipts for reimbursable expenses 
D) paying year-end bonuses rather than higher monthly earnings

Question 20

Which of the following would violate transitivity?

Accepted Answer

A) Vanessa likes A more than B, C more than B, and C more than A. 
B) Jay likes C more than B, A more than B, B more than D, and C more than D. 
C) Maddy likes C more than A, B more than D, A more than B, and D more than C. 
D) Victoria likes C more than B, C more than D, and B more than D. 
A) Vanessa likes A more than B, C more than B, and C more than A. 
B) Jay likes C more than B, A more than B, B more than D, and C more than D. 
C) Maddy likes C more than A, B more than D, A more than B, and D more than C. 
D) Victoria likes C more than B, C more than D, and B more than D.

Exam 22: Frontiers in Microeconomics

​Which of the following frontier areas of microeconomics applies economic tools to the study of government (or public) choice?

​The median voter theorem states that

An action taken by an informed party to reveal private information to an uninformed party is called

The moral-hazard problem and the desire of firms to lessen that problem serve as a plausible explanation for a firm paying above-equilibrium wages to its workers.

According to one survey 76 percent of Americans said they were not saving enough for retirement. This example of inconsistency over time

In corporations, a principal-agent problem can arise when

Arrow's impossibility theorem states that the majority rule fails to produce transitive preferences for society.

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

When some people are better informed than others and the imbalance affects the choices they make, economists say there is

Severe adverse-selection problems may result in

Table 22-17 -Refer to Table 22-17. 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?

Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. ' -Refer to Table 22-14. What would the results of a Borda Count vote be?

Which of the following is an example of screening?

Table 22-19 The 600 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-19. If an election were held between spending $2 million and $4 million, the median voter would vote for

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums. This practice is best described as an example of

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

Which of the following is not a common response to the moral hazard problem that employers face?

Which of the following would violate transitivity?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Which of the following frontier areas of microeconomics applies economic tools to the study of government (or public) choice?

The median voter theorem states that

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