Question 1

Which of the following is an example of signaling?

Accepted Answer

A) Graduates of highly-respected universities highlight that fact on their resumes. 
B) Magazine advertisements include the phrase "as seen on TV." 
C) Advertisements for universities include the phrase "fully accredited." 
D) All of the above are correct. 
A) Graduates of highly-respected universities highlight that fact on their resumes. 
B) Magazine advertisements include the phrase "as seen on TV." 
C) Advertisements for universities include the phrase "fully accredited." 
D) All of the above are correct. D

Question 2

When asymmetric information affects a relationship between two parties,it is always the case that

Accepted Answer

A) neither party is well informed. 
B) one party is better informed than the other party. 
C) both parties are equally well informed. 
D) the government is better informed than either of the two parties. 
A) neither party is well informed. 
B) one party is better informed than the other party. 
C) both parties are equally well informed. 
D) the government is better informed than either of the two parties. B

Question 3

A worker knows more than his employer about how much effort he puts into his job.This is an example of

Accepted Answer

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

Question 4

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 5

Condorcet explained his paradox in a 1951 book called Social Choice and Individual Values.

Accepted Answer

A) True 
 B)False

Question 6

People interpret evidence to confirm beliefs they already hold.This statement is an example of which of the following systematic mistakes that people make found in studies of human decision-making?

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 
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

Question 7

The median voter's preferred outcome is the same as the

Accepted Answer

A) average preferred outcome. 
B) outcome preferred by the greatest number of voters. 
C) outcome produced by majority rule. 
D) outcome preferred by Arrow's "perfect" voter. 
A) average preferred outcome. 
B) outcome preferred by the greatest number of voters. 
C) outcome produced by majority rule. 
D) outcome preferred by Arrow's "perfect" voter.

Question 8

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Accepted Answer

Asymmetric information is present when t

Question 9

Table 22-2
The citizens of Paradoxopolis will decide whether to build a new school, build a new park, or build a new road. Exactly one of the three choices will prevail, and the choice will be made by way of pairwise voting, with the majority determining the outcome on each vote. The preferences of the voters are summarized in the table below.
  
-Refer to Table 22-2.Which of the following statements is correct?

Accepted Answer

A) In a pairwise election, "school" beats "road." 
B) In a pairwise election, "road" beats "park." 
C) In a pairwise election, "school" beats "park." 
D) All of the above are correct. 
A) In a pairwise election, "school" beats "road." 
B) In a pairwise election, "road" beats "park." 
C) In a pairwise election, "school" beats "park." 
D) All of the above are correct.

Question 10

Table 22-1
Three longtime friends-Sam, Diane, and Cliff-are deciding how they will spend their Saturday evening. They all agree that they should do one of three things: go to a movie, go to a concert, or go out to dinner. 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 22-1.If (1)the first vote pits "dinner" against "concert," and (2)the second vote pits "movie" against the winner of the first vote,then

Accepted Answer

A) "Dinner" wins the first vote and "dinner" wins the second vote, so they go to dinner. 
B) "Dinner" wins the first vote and "movie" wins the second vote, so they go to a movie. 
C) "Concert" wins the first vote and "concert" wins the second vote, so they go to a concert. 
D) "Concert" wins the first vote and "movie" wins the second vote, so they go to a movie. 
A) "Dinner" wins the first vote and "dinner" wins the second vote, so they go to dinner. 
B) "Dinner" wins the first vote and "movie" wins the second vote, so they go to a movie. 
C) "Concert" wins the first vote and "concert" wins the second vote, so they go to a concert. 
D) "Concert" wins the first vote and "movie" wins the second vote, so they go to a movie.

Question 11

In view of the possible need for government action in markets where asymmetric information is a problem,which of the following is a valid concern?

Accepted Answer

A) The government almost always has more information than the private parties. 
B) Private markets have no means of dealing with information asymmetries on their own. 
C) The government is itself an imperfect institution. 
D) Legally, the government can rarely intervene in markets. 
A) The government almost always has more information than the private parties. 
B) Private markets have no means of dealing with information asymmetries on their own. 
C) The government is itself an imperfect institution. 
D) Legally, the government can rarely intervene in markets.

Question 12

Economists use basic psychological insights in the field of study called

Accepted Answer

A) psychological economics. 
B) transitional economics. 
C) behavioral economics. 
D) social economics. 
A) psychological economics. 
B) transitional economics. 
C) behavioral economics. 
D) social economics.

Question 13

Scenario 22-2
Five voters must choose from among four options: W, X, Y, or Z. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter.
  
-Refer to Scenario 22-2.Which pairwise voting scheme would result in outcome Z?

Accepted Answer

A) First, choose between W and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and Z. 
B) First, choose between Z and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and W. 
C) First, choose between X and Z.Second, voters choose between the winner of the first vote and Y.Third, voters choose between the winner of the second vote and W. 
D) First, choose between X and W.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and Y. 
A) First, choose between W and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and Z. 
B) First, choose between Z and Y.Second, voters choose between the winner of the first vote and X.Third, voters choose between the winner of the second vote and W. 
C) First, choose between X and Z.Second, voters choose between the winner of the first vote and Y.Third, voters choose between the winner of the second vote and W. 
D) First, choose between X and W.Second, voters choose between the winner of the first vote and Z.Third, voters choose between the winner of the second vote and Y.

Question 14

Table 22-5
  
-Refer to Table 22-5.The table shows the preferences of four types of voters over four possible outcomes: W,X,Y,and Z.In addition,the table shows the percentage of voters of each type.Based on this information,which voter is the median voter?

Accepted Answer

A) Type 1 
B) Type 2 
C) Type 3 
D) There is no median voter in this example. 
A) Type 1 
B) Type 2 
C) Type 3 
D) There is no median voter in this example.

Question 15

When Republicans and Democrats offer similar platforms in an election campaign,a likely explanation is the

Accepted Answer

A) Arrow impossibility theorem. 
B) Condorcet paradox. 
C) median voter theorem. 
D) fact that politicians are more interested in the national interest than their own self-interest. 
A) Arrow impossibility theorem. 
B) Condorcet paradox. 
C) median voter theorem. 
D) fact that politicians are more interested in the national interest than their own self-interest.

Question 16

The results of the ultimatum game illustrate the fact that

Accepted Answer

A) people's behavior is often driven by an innate sense of fairness. 
B) homo economicus is a good description of people's behavior. 
C) self-interest brings out the most efficient economic outcome. 
D) Both b and c are correct. 
A) people's behavior is often driven by an innate sense of fairness. 
B) homo economicus is a good description of people's behavior. 
C) self-interest brings out the most efficient economic outcome. 
D) Both b and c are correct.

Question 17

On car insurance policies,State Ranch Insurance Company offers drivers an option: Policy 1 features a deductible of $1,000,and it requires a driver to pay an annual premium of $500.Policy 2 features a deductible of $500,and it requires a driver to pay an annual premium of $750.

Accepted Answer

A) In offering these two policies, State Ranch is engaging in illegal price discrimination. 
B) In offering these two policies, State Ranch is screening drivers. 
C) Policy 1 is more of a burden for safe drivers than it is for risky drivers. 
D) In offering these two policies, State Ranch is signaling their quality to drivers. 
A) In offering these two policies, State Ranch is engaging in illegal price discrimination. 
B) In offering these two policies, State Ranch is screening drivers. 
C) Policy 1 is more of a burden for safe drivers than it is for risky drivers. 
D) In offering these two policies, State Ranch is signaling their quality to drivers.

Question 18

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 19

One of the things that employers can do to lessen the moral hazard problem involving their employees is to pay them in advance for their work.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 22: Frontiers of Microeconomics

Which of the following is an example of signaling?

When asymmetric information affects a relationship between two parties,it is always the case that

A worker knows more than his employer about how much effort he puts into his job.This is an example of

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.

Condorcet explained his paradox in a 1951 book called Social Choice and Individual Values.

People interpret evidence to confirm beliefs they already hold.This statement is an example of which of the following systematic mistakes that people make found in studies of human decision-making?

The median voter's preferred outcome is the same as the

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

In view of the possible need for government action in markets where asymmetric information is a problem,which of the following is a valid concern?

Economists use basic psychological insights in the field of study called

Scenario 22-2 Five voters must choose from among four options: W, X, Y, or Z. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Scenario 22-2.Which pairwise voting scheme would result in outcome Z?

Table 22-5 -Refer to Table 22-5.The table shows the preferences of four types of voters over four possible outcomes: W,X,Y,and Z.In addition,the table shows the percentage of voters of each type.Based on this information,which voter is the median voter?

When Republicans and Democrats offer similar platforms in an election campaign,a likely explanation is the

The results of the ultimatum game illustrate the fact that

On car insurance policies,State Ranch Insurance Company offers drivers an option: Policy 1 features a deductible of $1,000,and it requires a driver to pay an annual premium of $500.Policy 2 features a deductible of $500,and it requires a driver to pay an annual premium of $750.

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?

One of the things that employers can do to lessen the moral hazard problem involving their employees is to pay them in advance for their work.

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: 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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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