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Exam 22: Frontiers in Microeconomics

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Question 221

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

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

E) A) and B)
F) A) and C)

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Question 222

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Scott's Painting Company paints houses. Since Scott's business does not have the name recognition of some of the bigger painting companies, Scott advertises a "Five-Year Money Back Guarantee" to indicate to buyers that his service is of high quality. This guarantee is an example of

A) screening.
B) signaling.
C) the seller's curse.
D) the principal-agent problem.

E) A) and B)
F) A) and D)

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Question 223

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Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

Scenario 22-2 A wireless telephone service provider offers three service plans to its consumers. -Refer to Scenario 22-2. By offering consumers these choices, the wireless telephone provider is

People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

Which of the following is not an example of a moral hazard problem?

The unanimity property states that the ranking between any two outcomes should not depend on whether some third outcome is available.

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

If the seller of a used car offers a limited warranty, the warranty is an example of a(n)

​When an agent attempts to reveal information to the principal, which of the following is occurring?

The field of political economy

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. The median voter is one who prefers to spend

A "satisficer" is a person who

Table 22-8 The citizens of Mayville are having a severe budget shortage and are faced with eliminating athletics from the town high school. The town administrator has determined that the town can afford to maintain one sport. 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 22-8. If a Borda count is used, what will be the outcome of the voting?

Table 22-21 The following table shows the number of voters preferring various amounts of spending to develop a river to make it more attractive for canoeing and kayaking. -Refer to Table 22-21. The city council is considering two alternative ballots. The first would allow voters to choose between $1.5 million and $2 million. The second would allow voters to select between $2 million and $2.5 million. If the first ballot is used,

Scenario 22-6 ​ Shana owns a boutique that sells high-end women's clothing and accessories. Katie works part-time at the boutique and frequently is the only employee in this small store. Shana pays Katie a wage that is higher than the market wage for this type of job. When the store is not full of customers, Katie diligently works on displays and cleans to keep the store looking its best. Belinda is a customer in the store who asks Katie's opinion on the quality of some jeans she is considering purchasing. Katie tells her the quality is great even though she's had several other customers return them due to flaws. Magda is another customer who is returning a necklace without volunteering that a gem is missing. -Refer to Scenario 22-2. Why do you suppose Shana pays Katie a wage higher than the market wage?

Some studies show that even students who earned high grades in science classes accept disproven explanations for scientific phenomena. These disproven explanations had been acquired prior to the science classes. These studies provide some support for which of the following systematic mistakes that people make?

Scenario 22-1 Esteban and Michaela own an apartment building. They hire Nico to manage the building and deal with tenants' complaints. They also hire Ted to make any necessary repairs to the apartments or the common area and they hire Rex to be the door guard at night. -Refer to Scenario 22-1. Which of the following is an example of a moral hazard problem?

According to the median voter theorem, majority rule will

Brandon is considering buying a used car but he first downloads a report from the internet that shows the history of accidents and major repairs conducted on the car. This action is called