Question 1

Table 22-13
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 22-13.If the mayor asks the residents to choose between the playground and the library using pairwise voting,

Accepted Answer

A)   the playground wins by 45%.
B)   the playground wins by 60%.
C)   the library wins by 20%.
D)   the library wins by 80%.E) None of the above
F) A) and B)

Question 2

In view of the possible need for government action in markets where asymmetric information is a problem,which of the following is a valid concern?

Accepted Answer

A)   The government rarely has more information than the private parties.
B)   Private markets can sometimes deal with information asymmetries on their own.
C)   The government is itself an imperfect institution.
D)   All of the above are valid concerns.E) All of the above
F) C) and D)

Question 3

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

Accepted Answer

A)   a person with car insurance drives recklessly
B)   a pet-sitter being paid to walk a dog for one hour per day only walks the dog for 20 minutes per day
C)   a thief steals a car
D)   All of the above are examples of moral hazard.E) A) and B)
F) None of the above

Question 4

Effective signals

Accepted Answer

A)   convey useful information from informed parties to uninformed parties.
B)   impose little or no cost on the signaler.
C)   cannot be conveyed accurately when there is an information asymmetry.
D)   can be used by employers to alleviate the moral hazard problem in the workplace.E) A) and D)
F) B) and C)

Question 5

The state of Massachusetts requires all citizens to purchase medical insurance or face a monetary penalty when filing their taxes.The penalty is significantly less than the average annual insurance premium.Moreover,the state requires insurance companies to issue policies to anyone who applies,regardless of their health at the time of application.Which of the following examples describes the inherent adverse selection problem?

Accepted Answer

A)   Tricia purchases an insurance policy through her employer and visits her doctor for annual check-ups.
B)   Sue purchases insurance only after learning that she has cancer.
C)   Mike pays the penalty rather than purchasing insurance because it is cheaper for him than paying insurance premiums and he is generally in good health.
D)   Both b and c are correct.E) A) and D)
F) A) and C)

Question 6

Peter was recently hired as a salesman for a national consulting firm.His job involves spending a significant portion of his time out of the office visiting prospects and attending conferences.His firm is paying him a wage that is higher than the equilibrium wage,but he receives much of his income in quarterly bonuses based on how much he sells.

Accepted Answer

A)   The consulting firm is trying to prevent adverse selection with its compensation strategy.
B)   Peter has an incentive to go golfing with his buddies rather than conducting sales meetings.
C)   The consulting firm is responding to the moral hazard problem with its compensation strategy.
D)   Peter should quit this job and take a job where he gets paid an equilibrium wage more frequently.E) All of the above
F) B) and C)

Question 7

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 D)
F) None of the above

Question 8

Table 22-9
 
-Refer to Table 22-9.The table shows the preferences of 100 voters over three possible outcomes: A,B,and C.If a Borda count election were held among these voters,giving three points to each voter's first choice,two points to the second choice,and one point to the last choice,which outcome would win the election?

Accepted Answer

A)   Outcome A
B)   Outcome B
C)   Outcome C
D)   Either outcome A or outcome C since these have the same total score.E) A) and B)
F) A) and C)

Question 9

The median voter's preferred outcome is the same as the

Accepted Answer

A)   average preferred outcome.
B)   outcome preferred by the greatest number of voters.
C)   outcome produced by majority rule.
D)   outcome preferred by Arrow's "perfect" voter.E) None of the above
F) B) and C)

Question 10

Table 22-4
Five voters must choose from among four options: A,B,C,or D.Each voter's preferences are summarized in the table below.Options higher in the table are more preferred by the voter.
 
-Refer to Table 22-4.If the vote were conducted according to a Borda count system where each person's first choice receives 4 points,second choice 3 points,third choice 2 points and fourth choice 1 point,the result would be

Accepted Answer

A)   that A would win.
B)   that B would win.
C)   that C would win.
D)   a tie between A and D.E) None of the above
F) B) and C)

Question 11

Which of the following relationships involves asymmetric information?

Accepted Answer

A)   An employee knows more than his employer knows about his work effort.
B)   A borrower knows more than the lender about his ability to repay the loan.
C)   The seller of a 30-year-old house knows more than the buyer about the condition of the house.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 12

Herbert Simon,one of the first social scientists to combine the study of economics and psychology,suggested that humans should be viewed as

Accepted Answer

A)   rational maximizers.
B)   satisficers.
C)   independent thinkers.
D)   signalers.E) C) and D)
F) None of the above

Question 13

When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Accepted Answer

A)   adverse selection.
B)   a Condorcet paradox.
C)   a screening problem.
D)   a moral hazard problem.E) B) and D)
F) C) and D)

Question 14

Table 22-3
The citizens of Anytown will decide whether to build a new library,a new community center,or a new ice rink.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 22-3.Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting in Anytown?

Accepted Answer

A)   The paradox implies that pairwise voting never produces transitive preferences,and so the voting in Anytown fails to produce transitive preferences.
B)   The paradox implies that pairwise voting sometimes (but not always) produces transitive preferences,and the voting in Anytown does produce transitive preferences.
C)   The paradox implies that pairwise voting sometimes (but not always) fails to produce transitive preferences,and the voting in Anytown fails to produce transitive preferences.
D)   The paradox does not apply to the case at hand,because the preferences of Type 3 voters are not individually transitive.E) C) and D)
F) All of the above

Question 15

Mankiw argues that a primary difference between taxing products like gasoline and taxing soda and other sugary drinks is that

Accepted Answer

A)   consumption of gasoline causes negative externalities on society while consumption of soda affects the consumer.
B)   the government can generate significant revenue from the gas tax but not from a soda tax.
C)   gasoline has inelastic demand but soda has elastic demand.
D)   Both a and c are correct.E) All of the above
F) C) and D)

Question 16

Based on studies of human decision making,many people care more about the fairness of a game than about their personal winnings.

Accepted Answer

A) True 
 B)False

Question 17

Eli and Peyton are playing the ultimatum game,starting with $100.The coin flip results in Eli being the one to propose a division of the $100.If Eli acts as economic theory assumes,he should propose that

Accepted Answer

A)   he gets $30 and Peyton gets $70.
B)   he gets $50 and Peyton gets $50.
C)   he gets $60 and Peyton gets $40.
D)   he gets $99 and Peyton gets $1.E) A) and B)
F) A) and C)

Question 18

Pete owns a small store.He has noticed that when he is not at the store monitoring his employees,his revenue goes down.What are two changes Pete could make to wages he pays his employees to correct this problem?

Accepted Answer

delay payment/tie pa...

Question 19

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)   Economists are not interested in finding new areas to study and new phenomena to explain.
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) A) and B)

Question 20

In corporations,a principal-agent problem can arise when

Accepted Answer

A)   the shareholders are the principal and the managers are the agent.
B)   the board of directors is the principal and the managers are the agent.
C)   the shareholders are the principal and the board of directors is the agent.
D)   All of the above are correct.E) None of the above
F) B) and C)

Exam 22: Frontiers of Microeconomics

When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Correct Answer
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Correct Answer
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Correct Answer
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Which of the following is not correct?

Correct Answer
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In view of the possible need for government action in markets where asymmetric information is a problem,which of the following is a valid concern?

Correct Answer
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Correct Answer
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Correct Answer
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Herbert Simon,one of the first social scientists to combine the study of economics and psychology,suggested that humans should be viewed as

Correct Answer
verified

Pete owns a small store.He has noticed that when he is not at the store monitoring his employees,his revenue goes down.What are two changes Pete could make to wages he pays his employees to correct this problem?

Correct Answer
verified
delay payment/tie pa...
View Answer

Correct Answer
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Based on studies of human decision making,many people care more about the fairness of a game than about their personal winnings.

Correct Answer
verified

Eli and Peyton are playing the ultimatum game,starting with $100.The coin flip results in Eli being the one to propose a division of the $100.If Eli acts as economic theory assumes,he should propose that

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Mankiw argues that a primary difference between taxing products like gasoline and taxing soda and other sugary drinks is that

Correct Answer
verified

Which of the following relationships involves asymmetric information?

Correct Answer
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Effective signals

Correct Answer
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The median voter's preferred outcome is the same as the

Correct Answer
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Which of the following is not an example of moral hazard?

Correct Answer
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In corporations,a principal-agent problem can arise when

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

When new professors are hired,their job performance is monitored closely.If they meet their institution's standards,they will eventually receive tenure.After receiving tenure,professors' job performance is less closely monitored,and they become difficult to fire.Tenure thus creates

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

In view of the possible need for government action in markets where asymmetric information is a problem,which of the following is a valid concern?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Herbert Simon,one of the first social scientists to combine the study of economics and psychology,suggested that humans should be viewed as

Correct AnswerverifiedShow Answer

Pete owns a small store.He has noticed that when he is not at the store monitoring his employees,his revenue goes down.What are two changes Pete could make to wages he pays his employees to correct this problem?

Correct Answerverifieddelay payment/tie pa...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Based on studies of human decision making,many people care more about the fairness of a game than about their personal winnings.

Correct AnswerverifiedShow Answer

Eli and Peyton are playing the ultimatum game,starting with $100.The coin flip results in Eli being the one to propose a division of the $100.If Eli acts as economic theory assumes,he should propose that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Mankiw argues that a primary difference between taxing products like gasoline and taxing soda and other sugary drinks is that

Correct AnswerverifiedShow Answer

Which of the following relationships involves asymmetric information?

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Effective signals

Correct AnswerverifiedShow Answer

The median voter's preferred outcome is the same as the

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

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In corporations,a principal-agent problem can arise when

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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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delay payment/tie pa...
View Answer

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