Question 1

Which action best exemplifies the concept of signalling

Accepted Answer

A)  A college student's parents, having learned that their child is short of money, send her a cheque for $1000.
B)  A woman, who is trying to win the love of a certain man, buys him a very personal gift.
C)  A grocery store maintains a policy of examining the driver's licence of everyone who writes a personal cheque to purchase their groceries.
D)  A university maintains a policy of considering for admission only those students who graduated among the top 10 percent of their high school class.E) B) and D)
F) A) and B)

Question 2

the two major problems caused by asymmetric information are the moral hazard problem and the principal-agent problem.

Accepted Answer

A) True 
 B)False

Question 3

Most economic models incorporate the assumption of rational behaviour on the part of economic actors.

Accepted Answer

A) True 
 B)False

Question 4

When does the moral hazard problem arise

Accepted Answer

A)  when an agent performs a task on behalf of a principal
B)  when a principal performs a task on behalf of an agent
C)  when a moral person trusts an immoral person to perform a task for him
D)  when an immoral person bribes a moral person to perform a task for herE) A) and B)
F) A) and C)

Question 5

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

Accepted Answer

A)  the outcome preferred by the mean (average)  voter
B)  the outcome preferred by the median voter
C)  the outcome that causes the ruling political party to increase its power
D)  the outcome preferred by the poorest voterE) A) and D)
F) B) and D)

Question 6

The buyer runs a risk of being sold a low quality good when which type of problem is present

Accepted Answer

A)  principal-agent problem
B)  moral-hazard problem
C)  problem involving hidden actions
D)  problem involving hidden characteristicsE) B) and D)
F) C) and D)

Question 7

Table 22-2
Voters are deciding how they will spend the City of Elmongary's budget surplus.They have enough money to build one of three projects: build a school, build a skate park, or build a bike lane for commuters.They agree that they will have two pairwise votes to determine how to spend their budget, with the majority determining the outcome on each vote.The first, second, and third choices for each project are as indicated in the table below. 
-Refer to Table 22-2.What is a possible outcome in a pairwise election

Accepted Answer

A)  In a pairwise election, "school" beats "bike lane."
B)  In a pairwise election, "bike lane" beats "skate park."
C)  In a pairwise election, "school" beats "skate park."
D)  In a pairwise election, "skate park" beats "school."E) All of the above
F) B) and D)

Question 8

The species of organism whose members always rationally weigh all the relevant costs and benefits in choosing the best course of action is called what

Accepted Answer

A)  Homo economicus
B)  Homo sapiens
C)  Homo rationalicus
D)  Homo microcosmicusE) A) and B)
F) C) and D)

Question 9

In the relationship between a worker and her employer,which of the following are potential problems

Accepted Answer

A)  Asymmetric information is a potential problem, but moral hazard is not a potential problem.
B)  Asymmetric information is a potential problem, but adverse selection is not a potential problem.
C)  Moral hazard is a potential problem, but asymmetric information is not a potential problem.
D)  Adverse selection is a potential problem, but asymmetric information is not a potential problem.E) C) and D)
F) B) and D)

Question 10

Economists use basic psychological insights in which field of study

Accepted Answer

A)  psychological economics
B)  transitional economics
C)  behavioural economics
D)  social economicsE) B) and C)
F) All of the above

Question 11

How can employers try to overcome the moral hazard problem involving their employees

Accepted Answer

A)  by paying their employees more often
B)  by paying their employees minimum wage
C)  by better monitoring of their employees' work efforts
D)  by paying their employees in cashE) A) and D)
F) All of the above

Question 12

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

Accepted Answer

A)  Is there a perfect voting system?
B)  Are preferences transitive?
C)  Is government an imperfect institution?
D)  Should politicians face fixed terms?E) None of the above
F) A) and D)

Question 13

What does the field of political economy apply

Accepted Answer

A)  It applies government intervention and casts aside most of the standard methods of economic analysis.
B)  It applies the methods of economics to study how government works.
C)  It applies the methods of economics to study how the financial sector works.
D)  It applies the conclusion that democratic principles never lead to desirable economic outcomes.E) A) and B)
F) All of the above

Question 14

What do most economic models do

Accepted Answer

A)  They incorporate the assumption of rational behaviour on the part of economic actors.
B)  They incorporate the notion that people are usually reluctant to change their minds.
C)  They try to duplicate reality.
D)  They try to describe behaviour rather than prescribe behaviour.E) B) and C)
F) C) and D)

Question 15

Table 22-1
Three long-time friends, Sam, Denise, and Carlos, 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 bowling, 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.Which statement regarding the Condorcet paradox and the results of pairwise voting by Sam,Denise,and Carlos is most accurate

Accepted Answer

A)  The paradox implies that pairwise voting never produces transitive preferences, and so the voting by Sam, Denise, and Carlos fails to produce transitive preferences.
B)  The paradox implies that pairwise voting sometimes (but not always)  produces transitive preferences, and the voting by Sam, Denise, and Carlos does produce transitive preferences.
C)  The paradox implies that pairwise voting sometimes (but not always)  fails to produce transitive preferences, and the voting by Sam, Denise, and Carlos fails to produce transitive preferences.
D)  The paradox implies that pairwise voting almost never produces transitive preferences, but the voting by Sam, Denise, and Carlos does produce transitive preferences.E) A) and D)
F) A) and C)

Question 16

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.What did Arrow call this property

Accepted Answer

A)  transitivity
B)  unanimity
C)  independence of irrelevant alternatives
D)  individual preferenceE) A) and B)
F) C) and D)

Question 17

The statement that political platforms compete for the middle refers directly to the result established by which proposition

Accepted Answer

A)  the Arrow impossibility theorem
B)  the Condorcet paradox
C)  the median voter theorem
D)  the Borda mechanismE) A) and D)
F) A) and C)

Question 18

In economics,which term refers to a difference in access to relevant knowledge

Accepted Answer

A)  a behavioural gap
B)  a concealment gap
C)  an information asymmetry
D)  an access imperfectionE) B) and D)
F) B) and C)

Question 19

Can human beings always make rational decisions

Accepted Answer

A)  No, it is not always rational in the real world, even though rationality is an important assumption in most economic models.
B)  Yes, it is almost always rational in the real world, even though rationality is not an important assumption in most economic models.
C)  Yes, it is less complex than is assumed in conventional economic theory.
D)  No, in the real world, it has very little to do with either economics or psychology.E) A) and C)
F) B) and C)

Question 20

Which statement best captures the meaning of transitivity of preferences

Accepted Answer

A)  If A is preferred to B, then B is less preferred than A.
B)  If A is preferred to B and B is preferred to C, then A is preferred to C.
C)  If A is preferred to B and B is preferred to C, then the preference for A over B is stronger than the preference for B over C.
D)  If A is preferred to C, then there exists B such that A is preferred to B and B is preferred to C.E) A) and D)
F) B) and C)

Exam 22: Frontiers of Microeconomics

How can employers try to overcome the moral hazard problem involving their employees

Correct Answer
verified

Can human beings always make rational decisions

Correct Answer
verified

What does the field of political economy apply

Correct Answer
verified

When does the moral hazard problem arise

Correct Answer
verified

The species of organism whose members always rationally weigh all the relevant costs and benefits in choosing the best course of action is called what

Correct Answer
verified

Most economic models incorporate the assumption of rational behaviour on the part of economic actors.

Correct Answer
verified

Economists use basic psychological insights in which field of study

Correct Answer
verified

The buyer runs a risk of being sold a low quality good when which type of problem is present

Correct Answer
verified

In the relationship between a worker and her employer,which of the following are potential problems

Correct Answer
verified

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

Correct Answer
verified

the two major problems caused by asymmetric information are the moral hazard problem and the principal-agent problem.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

The statement that political platforms compete for the middle refers directly to the result established by which proposition

Correct Answer
verified

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.What did Arrow call this property

Correct Answer
verified

Which action best exemplifies the concept of signalling

Correct Answer
verified

Which statement best captures the meaning of transitivity of preferences

Correct Answer
verified

In economics,which term refers to a difference in access to relevant knowledge

Correct Answer
verified

Correct Answer
verified

What do most economic models do

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

How can employers try to overcome the moral hazard problem involving their employees

Correct AnswerverifiedShow Answer

Can human beings always make rational decisions

Correct AnswerverifiedShow Answer

What does the field of political economy apply

Correct AnswerverifiedShow Answer

When does the moral hazard problem arise

Correct AnswerverifiedShow Answer

The species of organism whose members always rationally weigh all the relevant costs and benefits in choosing the best course of action is called what

Correct AnswerverifiedShow Answer

Most economic models incorporate the assumption of rational behaviour on the part of economic actors.

Correct AnswerverifiedShow Answer

Economists use basic psychological insights in which field of study

Correct AnswerverifiedShow Answer

The buyer runs a risk of being sold a low quality good when which type of problem is present

Correct AnswerverifiedShow Answer

In the relationship between a worker and her employer,which of the following are potential problems

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

the two major problems caused by asymmetric information are the moral hazard problem and the principal-agent problem.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The statement that political platforms compete for the middle refers directly to the result established by which proposition

Correct AnswerverifiedShow Answer

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.What did Arrow call this property

Correct AnswerverifiedShow Answer

Which action best exemplifies the concept of signalling

Correct AnswerverifiedShow Answer

Which statement best captures the meaning of transitivity of preferences

Correct AnswerverifiedShow Answer

In economics,which term refers to a difference in access to relevant knowledge

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What do most economic models do

Correct AnswerverifiedShow Answer

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