Question 1

Scenario 22-3
At issue in a particular city vote is how much to spend, per person, on road repair next year. Among the 10,000 voters, 2,900 prefer to spend $500 per person, but no more; 2,200 prefer to spend $600 per person, but no more; 1,900 prefer to spend $800 per person, but no more; 1,600 prefer to spend $1,200 but no more, and 1,400 prefer to spend $1,400 per person, but no more.
-Refer to Scenario 22-3. If there is a vote on whether to spend $600 per person or $800 per person, the median voter will vote to spend

Accepted Answer

A)   $800 per person and the voting outcome will be $800 per person.
B)   $800 per person and the voting outcome will be $600 per person.
C)   $600 per person and the voting outcome will be $800 per person.
D)   $600 per person and the voting outcome will be $600 per person.E) B) and C)
F) A) and D)

Question 2

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "transitivity" to mean

Accepted Answer

A)   A beats B only if everyone prefers A to B.
B)   if everyone prefers A to B, then A beats B.
C)   if A beats B and B beats C, then A must beat C.
D)   everyone who is eligible to vote must vote; otherwise, the outcome is invalid.E) A) and C)
F) A) and B)

Question 3

The suggestion that people are "satisficers" is similar to the view that people

Accepted Answer

A)   are wealth-maximizers.
B)   exhibit "bounded rationality."
C)   go to a lot of trouble to weigh costs and benefits before choosing a course of action.
D)   change their minds often.E) A) and C)
F) C) and D)

Question 4

Which of the following is a lesson from the Condorcet paradox?

Accepted Answer

A)   If voters are choosing a point along a line, then majority rule will pick the most preferred point of the median voter.
B)   Under certain conditions, there is no scheme for aggregating individual preferences.
C)   When there are more than two options, deciding the order in which to vote can have a powerful influence over the outcome of an election.
D)   Majority voting always indicates what outcome a society really wants.E) A) and D)
F) B) and C)

Question 5

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. This voting method is called a(n)

Accepted Answer

A)   median vote.
B)   pairwise minority vote.
C)   Borda count.
D)   Arrow count.E) A) and B)
F) A) and C)

Question 6

Steve borrowed some money from Summit Bank, telling the loan officer that he intended to use the money to remodel his restaurant. After getting the loan, Steve and his girlfriend immediately took the money and went gambling in Vegas.

Accepted Answer

A)   This is an example of adverse selection since banks have difficulty selecting their customers.
B)   This example does not involve asymmetric information.
C)   From the given information, Steve is the principal and Summit Bank is the agent.
D)   None of the above are correct.E) A) and C)
F) A) and B)

Question 7

Which of the following relationships involves asymmetric information?

Accepted Answer

A)   Patients can look up information regarding certain prescription drugs giving them the same information as their doctors.
B)   Consumer Reports allows customers of DVD players to know as much about the quality of various players as the store salesperson.
C)   Car Fax allows car buyers to obtain used-vehicle histories providing them with the same information as the dealership salesperson.
D)   The batter in a baseball game must guess whether the pitcher is going to throw a fastball, curveball, or change-up.E) A) and B)
F) None of the above

Question 8

Jane spends 85% of her income each year, even though she knows she should be saving 20% for retirement. Jane's behavior indicates that her behavior tends to be

Accepted Answer

A)   irrational.
B)   inconsistent over time.
C)   satisficing rather than maximizing.
D)   undefined.E) C) and D)
F) None of the above

Question 9

Government action in cases of asymmetric information may not be an ideal solution because

Accepted Answer

A)   the private market can sometimes deal with information asymmetries on its own.
B)   the government tends to have more information than private parties.
C)   both (a)  and (b) .
D)   None of the above is correct.E) A) and C)
F) B) and C)

Question 10

One implication of the Condorcet paradox is

Accepted Answer

A)   that the order in which things are voted on can affect the result.
B)   that the order in which things are voted on is irrelevant.
C)   that you do not want to be in charge of arranging which items are voted upon first.
D)   that when there are only two items being voted on the order matters.E) B) and D)
F) All of the above

Question 11

The field of economics that combines the study the psychology of human behavior and economic issues is

Accepted Answer

behavioral...

Question 12

Sam needs to have his car serviced. There is an auto repair shop located nearby that does a lot of business and has an online rating of 4 out of 5 stars. Sam takes his car to be serviced and thinks the service person is grumpy and that his car is still not running as well as it could be. Sam then makes a point of telling his friends not to use the repair shop. Sam's actions illustrate which of the following systematic mistakes that people make when making decisions?

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 are correct.E) C) and D)
F) A) and B)

Question 13

Herbert Simon, one of the first social scientists to work at the boundary of economics and psychology, suggested that humans should be viewed not as rational maximers but as

Accepted Answer

The answer of Herbert Simon, one of the first social...

Question 14

Table 22-2
Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their Sunday afternoon. They all agree that they should do one of three things: go to a movie, play golf, or go to a baseball game. They also agree that they will have two pairwise votes to determine how to spend their afternoon, 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 22-2. If (1)  the first vote pits "baseball game" against "golf," and (2)  the second vote pits "movie" against the winner of the first vote, then

Accepted Answer

A)   "Baseball game" wins the first vote and "baseball game" wins the second vote, so they go to a baseball game.
B)   "Baseball game" wins the first vote and "movie" wins the second vote, so they go to a movie.
C)   "golf" wins the first vote and "golf" wins the second vote, so they play golf.
D)   "golf" wins the first vote and "movie" wins the second vote, so they go to a movie.E) B) and D)
F) All of the above

Question 15

Which of the following is not correct?

Accepted Answer

A)   Economics is a study of the choices that people make and the resulting interactions they have with one another.
B)   In areas it has already studied, economists have found perfect and unchanging answers.
C)   Economists are trying to expand their understanding of human behavior and society.
D)   The economics of asymmetric information, political economy, and behavioral economics are all topics at the frontier of microeconomics.E) None of the above
F) All of the above

Question 16

The Arrow impossibility theorem shows that

Accepted Answer

A)   democracy should be abandoned as a form of government.
B)   it is impossible to improve upon democratic voting methods as a mechanism for social choice.
C)   all voting systems are flawed as a mechanism for social choice.
D)   the median voter's preferences will always win in a two­way vote.E) B) and D)
F) None of the above

Question 17

Which of the following is an example of screening?

Accepted Answer

A)   a man buys an expensive birthday present for his girlfriend
B)   an insurance company offers a policy with a high deductible
C)   the seller of a used motorcycle knows more about its true condition than a prospective buyer
D)   society supports long prison terms for corporate criminalsE) All of the above
F) B) and C)

Question 18

Your city newspaper publishes a "Best of" poll that lists its readers' favorite restaurants. Mundo Bar and Grill is ranked as the best casual restaurant. Your best friend had dinner at Mundo Bar and Grill last week and commented that the food was mediocre and the service was slow. You decide not to have dinner at Mundo Bar and Grill based on your friend's experience. Your decision illustrates that people

Accepted Answer

A)   are reluctant to change their minds.
B)   are overconfident.
C)   give too much weight to a small number of vivid observations.
D)   are satisficers.E) None of the above
F) All of the above

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A mother gives her teenage daughter two choices: spend 20 minutes cleaning her room today or spend 25 minutes cleaning her room tomorrow. The same mother gives her same daughter two additional choices: clean out the garage for 20 minutes next Tuesday or 25 minutes next Wednesday. According to economic theory,

Accepted Answer

A)   if the daughter chooses to procrastinate, she is behaving irrationally.
B)   the daughter will likely choose to clean out her room tomorrow but clean out the garage next Tuesday.
C)   the daughter will likely choose to clean out her room tomorrow and clean out the garage next Wednesday.
D)   if the daughter chooses to procrastinate, she is exhibiting satisficing behavior.E) A) and D)
F) A) and C)

Exam 22: Frontiers of Microeconomics

Which of the following relationships involves asymmetric information?

Correct Answer
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Correct Answer
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Correct Answer
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The suggestion that people are "satisficers" is similar to the view that people

Correct Answer
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Which of the following is not correct?

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. This voting method is called a(n)

Correct Answer
verified

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "transitivity" to mean

Correct Answer
verified

The field of economics that combines the study the psychology of human behavior and economic issues is

Correct Answer
verified
behavioral...
View Answer

Correct Answer
verified

Which of the following is a lesson from the Condorcet paradox?

Correct Answer
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Correct Answer
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Steve borrowed some money from Summit Bank, telling the loan officer that he intended to use the money to remodel his restaurant. After getting the loan, Steve and his girlfriend immediately took the money and went gambling in Vegas.

Correct Answer
verified

Herbert Simon, one of the first social scientists to work at the boundary of economics and psychology, suggested that humans should be viewed not as rational maximers but as

Correct Answer
verified

The Arrow impossibility theorem shows that

Correct Answer
verified

Correct Answer
verified

Government action in cases of asymmetric information may not be an ideal solution because

Correct Answer
verified

Jane spends 85% of her income each year, even though she knows she should be saving 20% for retirement. Jane's behavior indicates that her behavior tends to be

Correct Answer
verified

One implication of the Condorcet paradox is

Correct Answer
verified

Which of the following is an example of screening?

Correct Answer
verified

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

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

Which of the following relationships involves asymmetric information?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The suggestion that people are "satisficers" is similar to the view that people

Correct AnswerverifiedShow Answer

Which of the following is not correct?

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. This voting method is called a(n)

Correct AnswerverifiedShow Answer

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "transitivity" to mean

Correct AnswerverifiedShow Answer

The field of economics that combines the study the psychology of human behavior and economic issues is

Correct Answerverifiedbehavioral...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a lesson from the Condorcet paradox?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Steve borrowed some money from Summit Bank, telling the loan officer that he intended to use the money to remodel his restaurant. After getting the loan, Steve and his girlfriend immediately took the money and went gambling in Vegas.

Correct AnswerverifiedShow Answer

Herbert Simon, one of the first social scientists to work at the boundary of economics and psychology, suggested that humans should be viewed not as rational maximers but as

Correct AnswerverifiedShow Answer

The Arrow impossibility theorem shows that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Government action in cases of asymmetric information may not be an ideal solution because

Correct AnswerverifiedShow Answer

Jane spends 85% of her income each year, even though she knows she should be saving 20% for retirement. Jane's behavior indicates that her behavior tends to be

Correct AnswerverifiedShow Answer

One implication of the Condorcet paradox is

Correct AnswerverifiedShow Answer

Which of the following is an example of screening?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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behavioral...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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