Question 1

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

Accepted Answer

A)   unanimity and transitivity only
B)   transitivity and independence of irrelevant alternatives only
C)   no dictators and transitivity only
D)   unanimity, transitivity, independence of irrelevant alternatives, and no dictatorsE) C) and D)
F) A) and C)

Question 2

Some of the systematic mistakes that people make include

Accepted Answer

A)   being overconfident.
B)   placing too much weight on events that are more vivid compared to those with greater statistical probability.
C)   being generally unwilling to change their minds.
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 3

Lindsay and Tim are playing the ultimatum game starting with $100. Based on the coin toss, Lindsay is the player to propose a division of the $100. If Lindsay acts as economic theory assumes, she should propose that

Accepted Answer

she gets $...

Question 4

When asked to give a range for the height of the tallest mountain in North America such that people were 90 percent confident the true number falls within it, most people gave ranges that were

Accepted Answer

The answer of When asked to give a range for...

Question 5

The Condorcet voting paradox applies to situations in which voters

Accepted Answer

A)   decide between exactly two possible outcomes.
B)   decide among more than two possible outcomes.
C)   as a group have transitive preferences.
D)   choose the inferior candidate even though the majority preferred the better candidate.E) B) and D)
F) B) and C)

Question 6

Table 22-16
The Johnson family is planning a vacation and, though Mr. and Mrs. Johnson will be paying for the trip, they have decided to use a democratic voting process to choose their destination. The family members' preferences are reflected in the table below.
 
-Refer to Table 22-16. Suppose that before the family can arrive at their decision, Opryland announced that it will be closed for the season due to flooding. Mr. Johnson recommends using a vote by majority rule and proposes first choosing between the Grand Canyon and Sea World, and then choosing between the winner of the first vote and Disneyland. If everyone votes according to their preferences,

Accepted Answer

A)   the winner of the first vote will be Sea World, the winner of the second vote will be Disneyland.
B)   the winner of the first vote will be Sea World, the winner of the second vote will be Grand Canyon.
C)   the winner of the first vote will be Grand Canyon, the winner of the second vote will be Disneyland.
D)   the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon.E) A) and B)
F) B) and D)

Question 7

An unhealthy person would likely choose a medical insurance policy with a

Accepted Answer

A)   low premium and a high deductible.
B)   high premium and a high deductible.
C)   high premium and no deductible.
D)   The unhealthy person would choose not to be insured.E) All of the above
F) B) and D)

Question 8

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Accepted Answer

A)   the Condorcet Paradox.
B)   signaling.
C)   moral hazard.
D)   screening.E) A) and D)
F) B) and C)

Question 9

Scenario 22-4
Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza. Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne. Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti.
-Refer to Scenario 22-4. If, before any votes were cast, ravioli was eliminated from the choices and the vote were conducted according to a Borda count system where each person's first choice receives 3 points, second choice 2 points, and third choice 1 point, the election winner would be

Accepted Answer

A)   pizza.
B)   spaghetti
C)   lasagne.
D)   The result would be a three-way tie between pizza, spaghetti and lasagne.E) B) and D)
F) A) and B)

Question 10

The problem of moral hazard is a problem of hidden action.

Accepted Answer

A) True 
 B)False

Question 11

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany exhibit?

Accepted Answer

A)   People are overconfident.
B)   People care about fairness.
C)   People are reluctant to change their minds.
D)   People are inconsistent over time.E) None of the above
F) B) and D)

Question 12

Economic theory assumes that voters, politicians, and other political participants are largely motivated by

Accepted Answer

A)   personal self-interest.
B)   altruism.
C)   a desire to promote the general welfare.
D)   a desire to promote allocative economic efficiency.E) A) and B)
F) A) and C)

Question 13

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Accepted Answer

A)   physics.
B)   biology.
C)   psychology.
D)   anthropology.E) All of the above
F) None of the above

Question 14

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Accepted Answer

A)   $500 and that the other player gets $500.
B)   $998 and that the other player gets $2.
C)   $999 and that the other player gets $1.
D)   $1000 and that the other player gets nothing.E) None of the above
F) A) and B)

Question 15

Table 22-4
The fortunate residents of Anytown have a budget surplus. The mayor decided that it is only fair to have the residents vote on what to do with the surplus. The mayor has narrowed the options down to three possible projects: a playground, a library, or a swimming pool. The voters fall into three categories and have preferences as illustrated in the table.
 
-Refer to Table 22-4. If the mayor asks the residents to choose between the playground and the swimming pool using pairwise voting,

Accepted Answer

A)   the playground wins by 10%.
B)   the playground wins by 45%.
C)   the swimming pool wins by 10%.
D)   the swimming pool wins by 55%.E) B) and C)
F) C) and D)

Question 16

In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could

Accepted Answer

A)   better monitor the agent.
B)   pay the agent above-equilibrium wages.
C)   delay payment to the agent.
D)   stop paying bonuses.E) A) and B)
F) B) and C)

Question 17

Refer to Narrative 22-1. Which of the ladies is the victim of an adverse selection problem?

Accepted Answer

A)   Shana
B)   Katie
C)   Belinda
D)   MagdaE) All of the above
F) B) and C)

Question 18

Employers can try to overcome the moral-hazard problem involving their employees by

Accepted Answer

A)   paying their employees more often.
B)   paying their employees below-equilibrium wages since the employees will likely shirk some of their responsibilities.
C)   better monitoring their employees' work efforts.
D)   requiring their employees to take a pre-employment work effort test.E) None of the above
F) B) and C)

Question 19

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

Accepted Answer

A)   Parking ramps require customers to take a ticket with the time stamped on it from a machine in order to gain entrance.
B)   Part of the income of waiters and waitresses is based on tips.
C)   Both A and B are correct.
D)   None of the above are correct.E) B) and C)
F) A) and B)

Question 20

Scenario 22-4
Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza. Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne. Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti.
-Refer to Scenario 22-4. Vinny recommends using a vote by majority rule and wants to be sure that his first choice becomes the winner. Which order should he should propose to use for pairwise voting to ensure his desired outcome?

Accepted Answer

A)   first choosing between ravioli and spaghetti, then choosing between the winner of the first vote and pizza, and finally choosing between the winner of the second vote and lasagne
B)   first choosing between pizza and spaghetti, then choosing between the winner of the first vote and lasagne, and finally choosing between the winner of the second vote and ravioli
C)   first choosing between lasagne and pizza, then choosing between the winner of the first vote and ravioli, and finally choosing between the winner of the second vote and spaghetti
D)   None of the proposed voting orders will result in Vinny's first choice winning the vote.E) None of the above
F) B) and D)

Exam 22: Frontiers of Microeconomics

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

Correct Answer
verified

In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could

Correct Answer
verified

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Correct Answer
verified

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Refer to Narrative 22-1. Which of the ladies is the victim of an adverse selection problem?

Correct Answer
verified

An unhealthy person would likely choose a medical insurance policy with a

Correct Answer
verified

Lindsay and Tim are playing the ultimatum game starting with $100. Based on the coin toss, Lindsay is the player to propose a division of the $100. If Lindsay acts as economic theory assumes, she should propose that

Correct Answer
verified
she gets $...
View Answer

Economic theory assumes that voters, politicians, and other political participants are largely motivated by

Correct Answer
verified

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany exhibit?

Correct Answer
verified

Some of the systematic mistakes that people make include

Correct Answer
verified

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Correct Answer
verified

The problem of moral hazard is a problem of hidden action.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

Correct Answer
verified

When asked to give a range for the height of the tallest mountain in North America such that people were 90 percent confident the true number falls within it, most people gave ranges that were

Correct Answer
verified

Employers can try to overcome the moral-hazard problem involving their employees by

Correct Answer
verified

The Condorcet voting paradox applies to situations in which voters

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

Correct AnswerverifiedShow Answer

In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could

Correct AnswerverifiedShow Answer

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Correct AnswerverifiedShow Answer

Studies show that during the March Madness college basketball tournament, the productivity of the average company in the US falls considerably. This is an example of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to Narrative 22-1. Which of the ladies is the victim of an adverse selection problem?

Correct AnswerverifiedShow Answer

An unhealthy person would likely choose a medical insurance policy with a

Correct AnswerverifiedShow Answer

Lindsay and Tim are playing the ultimatum game starting with $100. Based on the coin toss, Lindsay is the player to propose a division of the $100. If Lindsay acts as economic theory assumes, she should propose that

Correct Answerverifiedshe gets $...View AnswerShow Answer

Economic theory assumes that voters, politicians, and other political participants are largely motivated by

Correct AnswerverifiedShow Answer

Brittany decides to save $50 from each paycheck so that she can go on a Spring Break trip with her college roommates. However, when she gets paid this week, she spends all of her money on new clothes. Which of the following insights into human behavior does Brittany exhibit?

Correct AnswerverifiedShow Answer

Some of the systematic mistakes that people make include

Correct AnswerverifiedShow Answer

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Correct AnswerverifiedShow Answer

The problem of moral hazard is a problem of hidden action.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following practices are, at least in part, attempts to reduce moral hazard problems?

Correct AnswerverifiedShow Answer

When asked to give a range for the height of the tallest mountain in North America such that people were 90 percent confident the true number falls within it, most people gave ranges that were

Correct AnswerverifiedShow Answer

Employers can try to overcome the moral-hazard problem involving their employees by

Correct AnswerverifiedShow Answer

The Condorcet voting paradox applies to situations in which voters

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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she gets $...
View Answer

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