Question 1

As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.What is this voting method called

Accepted Answer

A)  a median voter theorem
B)  a pairwise minority vote
C)  a Borda count
D)  an Arrow countE) None of the above
F) All of the above

Question 2

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to which theory

Accepted Answer

A)  efficiency-wage theories
B)  minimum-wage theories
C)  monitoring theory
D)  signalling theoryE) None of the above
F) B) and D)

Question 3

The Borda count fails to satisfy which of Kenneth Arrow's properties of a perfect voting system

Accepted Answer

A)  no dictator
B)  unanimity
C)  transitivity
D)  independence of irrelevant alternativesE) All of the above
F) None of the above

Question 4

The fact that people in average health may be discouraged from buying health insurance by the high price is likely a consequence of the lemons problem in the market for health insurance.

Accepted Answer

A) True 
 B)False

Question 5

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.If (1)  the first vote pits "school" against "bike lane," and (2)  the second vote pits "skate park" against the winner of the first vote,what is the outcome

Accepted Answer

A)  "School" wins the first vote and "school" wins the second vote, so they build a school.
B)  "School" wins the first vote and "skate park" wins the second vote, so they build a skate park.
C)  "Bike lane" wins the first vote and "bike lane" wins the second vote, so they build a bike lane.
D)  "Bike lane" wins the first vote and "skate park" wins the second vote, so they build a skate park.E) B) and C)
F) None of the above

Question 6

In the worker-employer relationship,how may inappropriate or immoral behaviour best be characterized

Accepted Answer

A)  It generally takes the form of workers shirking their responsibilities.
B)  It generally takes the form of employers being unfair to their workers.
C)  It is not generally regarded as a significant problem.
D)  It is generally regarded as a significant problem, but it does not arise from asymmetric information.E) B) and C)
F) A) and C)

Question 7

The Condorcet voting paradox is that outcomes based on dictatorial preferences do not always obey the property of transitivity.

Accepted Answer

A) True 
 B)False

Question 8

How is the signalling theory of education related to other theories that explain the determinants of wages

Accepted Answer

A)  It contrasts with efficiency-wage theories.
B)  It closely parallels efficiency-wage theories.
C)  It contrasts with the human-capital theory.
D)  It closely parallels the human-capital theory.E) A) and B)
F) A) and C)

Question 9

The tendency of many people to procrastinate supports the view that people are consistent over time.

Accepted Answer

A) True 
 B)False

Question 10

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.

Accepted Answer

Drivers (buyers and potential buyers of ...

Question 11

How do hidden actions and hidden characteristics relate to the moral hazard and adverse selection problems

Accepted Answer

A)  Hidden actions and hidden characteristics are both associated with the moral hazard problem.
B)  Hidden actions and hidden characteristics are both associated with the adverse-selection problem.
C)  Hidden actions are associated with the moral hazard problem, whereas hidden characteristics are associated with the adverse-selection problem.
D)  Hidden actions are associated with the adverse-selection problem, whereas hidden characteristics are associated with the moral hazard problem.E) None of the above
F) C) and D)

Question 12

On car insurance policies,Prairie Ranch Insurance Company offers drivers an option: Policy 1 features a deductible of $2000 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.Why does the company offer two policies

Accepted Answer

A)  In offering these two policies, Prairie Ranch is engaging in price discrimination.
B)  In offering these two policies, Prairie Ranch is attempting to sort out the safe drivers from the risky drivers.
C)  In offering these two policies, Prairie Ranch can earn a higher profit on Policy 2 if it is bought by safe drivers.
D)  In offering these two policies, Prairie Ranch can earn a higher profit because only risky drivers will buy a policy.E) A) and B)
F) B) and D)

Question 13

Does fairness play a fundamental role in economic models of household and firm behaviour

Accepted Answer

A)  No, an innate sense of fairness plays no role.
B)  No, maximization of utility and profits play an insignificant role.
C)  No, inertia plays a significant role.
D)  No, consumer preferences play no role.E) A) and B)
F) C) and D)

Question 14

Because people with hidden health problems are more likely to buy health insurance than are other people,which outcome is the result

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)  People in higher risk may be buying too little insurance due to the higher cost.E) A) and B)
F) None of the above

Question 15

Which action would NOT be an example of a principal trying to deal with a moral-hazard problem

Accepted Answer

A)  The parents of an infant secretly place video cameras in their house before the babysitter arrives.
B)  An insurance company checks police records to determine if its policyholders have received traffic citations.
C)  An employer examines his workers' output on a daily basis.
D)  An employer agrees to lower daily output quotas.E) C) and D)
F) B) and C)

Question 16

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by which proposition

Accepted Answer

A)  the Arrow impossibility theorem
B)  the Condorcet paradox
C)  the pairwise voting proposition
D)  the median voter theoremE) None of the above
F) A) and C)

Question 17

What is a characteristic of the field of study called behavioural economics

Accepted Answer

A)  It suggests that humans should be viewed as rational maximizers.
B)  It is assumed that voters always impose their preferences on elected officials.
C)  Economists make use of insights from the discipline of psychology.
D)  Economists return, after many years, to the teachings of Adam Smith.E) A) and C)
F) B) and C)

Question 18

How can signalling theory explain the advertising strategies of a firm that produces a good quality product

Accepted Answer

A)  It is not a good example of asymmetric information.
B)  It has more to gain by signalling (advertising)  than does a firm with an inferior product.
C)  It will never signal (advertise) , regardless of the cost of the signal.
D)  It will signal (advertise)  only if the cost of the signal is very low.E) A) and B)
F) B) and C)

Question 19

Which statement best explains the relationship of moral hazard,adverse selection,hidden actions,and asymmetric information

Accepted Answer

A)  The moral hazard problem is a problem involving hidden actions.
B)  Adverse selection is a problem involving hidden actions.
C)  Adverse selection is a problem involving principals and agents.
D)  Moral hazard always involves asymmetric information; asymmetric information always involves adverse selection.E) None of the above
F) B) and C)

Question 20

What is the relationship of the Condorcet paradox to the Arrow impossibility theorem

Accepted Answer

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

Exam 22: Frontiers of Microeconomics

Correct Answer
verified

What is the relationship of the Condorcet paradox to the Arrow impossibility theorem

Correct Answer
verified

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by which proposition

Correct Answer
verified

As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.What is this voting method called

Correct Answer
verified

The tendency of many people to procrastinate supports the view that people are consistent over time.

Correct Answer
verified

What is a characteristic of the field of study called behavioural economics

Correct Answer
verified

The Condorcet voting paradox is that outcomes based on dictatorial preferences do not always obey the property of transitivity.

Correct Answer
verified

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.

Correct Answer
verified
Drivers (buyers and potential buyers of ...
View Answer

How can signalling theory explain the advertising strategies of a firm that produces a good quality product

Correct Answer
verified

How is the signalling theory of education related to other theories that explain the determinants of wages

Correct Answer
verified

Because people with hidden health problems are more likely to buy health insurance than are other people,which outcome is the result

Correct Answer
verified

Correct Answer
verified

The fact that people in average health may be discouraged from buying health insurance by the high price is likely a consequence of the lemons problem in the market for health insurance.

Correct Answer
verified

How do hidden actions and hidden characteristics relate to the moral hazard and adverse selection problems

Correct Answer
verified

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to which theory

Correct Answer
verified

Which action would NOT be an example of a principal trying to deal with a moral-hazard problem

Correct Answer
verified

Does fairness play a fundamental role in economic models of household and firm behaviour

Correct Answer
verified

The Borda count fails to satisfy which of Kenneth Arrow's properties of a perfect voting system

Correct Answer
verified

Which statement best explains the relationship of moral hazard,adverse selection,hidden actions,and asymmetric information

Correct Answer
verified

In the worker-employer relationship,how may inappropriate or immoral behaviour best be characterized

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

Correct AnswerverifiedShow Answer

What is the relationship of the Condorcet paradox to the Arrow impossibility theorem

Correct AnswerverifiedShow Answer

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by which proposition

Correct AnswerverifiedShow Answer

As an alternative to pairwise majority voting,each voter could be asked to rank the possible outcomes,giving 1 point to her lowest choice,2 points to her second-lowest choice,3 points to her third-lowest choice,and so on.What is this voting method called

Correct AnswerverifiedShow Answer

The tendency of many people to procrastinate supports the view that people are consistent over time.

Correct AnswerverifiedShow Answer

What is a characteristic of the field of study called behavioural economics

Correct AnswerverifiedShow Answer

The Condorcet voting paradox is that outcomes based on dictatorial preferences do not always obey the property of transitivity.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedDrivers (buyers and potential buyers of ...View AnswerShow Answer

How can signalling theory explain the advertising strategies of a firm that produces a good quality product

Correct AnswerverifiedShow Answer

How is the signalling theory of education related to other theories that explain the determinants of wages

Correct AnswerverifiedShow Answer

Because people with hidden health problems are more likely to buy health insurance than are other people,which outcome is the result

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The fact that people in average health may be discouraged from buying health insurance by the high price is likely a consequence of the lemons problem in the market for health insurance.

Correct AnswerverifiedShow Answer

How do hidden actions and hidden characteristics relate to the moral hazard and adverse selection problems

Correct AnswerverifiedShow Answer

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to which theory

Correct AnswerverifiedShow Answer

Which action would NOT be an example of a principal trying to deal with a moral-hazard problem

Correct AnswerverifiedShow Answer

Does fairness play a fundamental role in economic models of household and firm behaviour

Correct AnswerverifiedShow Answer

The Borda count fails to satisfy which of Kenneth Arrow's properties of a perfect voting system

Correct AnswerverifiedShow Answer

Which statement best explains the relationship of moral hazard,adverse selection,hidden actions,and asymmetric information

Correct AnswerverifiedShow Answer

In the worker-employer relationship,how may inappropriate or immoral behaviour best be characterized

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Drivers (buyers and potential buyers of ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified