Question 1

Evidence suggests that, in the real world, people appear to care about fairness

Accepted Answer

A)  only when it coincides with their own self-interest.
B)  only when it coincides with their determination to be consistent over time.
C)  even when it does not coincide with their own self-interest.
D)  not at all.E) A) and B)
F) C) and D)

Question 2

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 library and the swimming pool using pairwise voting,

Accepted Answer

A)  the library wins by 30%.
B)  the library wins by 65%.
C)  the swimming pool wins by 10%.
D)  the swimming pool wins by 35%.E) B) and D)
F) None of the above

Question 3

Table 22-5
The citizens of Anytown will decide whether to build a new library, a recreation center, or an arena. 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 22-5. Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting in Anytown?

Accepted Answer

A)  The results of pairwise voting depend on the order of the pairs and preferences are transitive.
B)  The results of pairwise voting depend on the order of the pairs, but preferences are not transitive.
C)  The results of pairwise voting do not depend on the order of the pairs, but preferences are transitive.
D)  The results of pairwise voting do not depend on the order of the pairs and preferences are not transitive.E) A) and B)
F) None of the above

Question 4

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) C) and D)
F) All of the above

Question 5

Normally, we expect voters' preferences to exhibit a property called

Accepted Answer

A)  transitivity.
B)  transversality.
C)  normality.
D)  universality.E) A) and D)
F) A) 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. If Mr. Johnson wants to ensure that his 1st choice becomes the family's winning destination, he should propose

Accepted Answer

A)  using a vote by majority rule and first choosing between Opryland and the Grand Canyon, then choosing between the winner of the first vote and Sea World, and finally choosing between the winner of the second vote and Disneyland.
B)  using a vote by majority rule and first choosing between Disneyland and Sea World, then choosing between the winner of the first vote and the Grand Canyon and finally choosing between the winner of the second vote and the Opryland.
C)  using a vote by majority rule and first choosing between Sea World and the Grand Canyon, then choosing between the winner of the first vote and Disneyland, and finally choosing between the winner of the second vote and Opryland.
D)  using a Borda count.E) A) and B)
F) A) and C)

Question 7

Under majority rule, the order in which items are voted on is

Accepted Answer

A)  unimportant, and this is a lesson of the Condorcet paradox.
B)  unimportant, and this is a lesson of Arrow's impossibility theorem.
C)  important, and this is a lesson of the Condorcet paradox.
D)  important, and this is a lesson of Arrow's impossibility theorem.E) A) and D)
F) A) and C)

Question 8

Severe adverse-selection problems may result in

Accepted Answer

A)  too few good used cars being offered for sale.
B)  wages that are too low relative to equilibrium levels.
C)  too many good drivers buying too much automobile insurance.
D)  people with average health buying too much health insurance.E) A) and B)
F) None of the above

Question 9

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. Which of the following is a strategy the consulting firm may employ to discourage Peter from shirking his responsibilities?

Accepted Answer

A)  Tell Peter that the shareholders want to earn a large profit this year.
B)  Stop paying Peter bonuses based on how much he's sold.
C)  Allow Peter to set his own schedule and work from home frequently.
D)  Pay Peter an above-equilibrium wage.E) A) and B)
F) A) and C)

Question 10

The Condorcet paradox tells us that, even though it is impossible to satisfy all of Arrow's properties of a desirable voting system, pairwise majority voting will always satisfy transitivity.

Accepted Answer

A) True 
 B)False

Question 11

A firm with a very good product

Accepted Answer

A)  has a higher cost of signaling (advertising)  than does a firm with an inferior product.
B)  has more to gain by signaling (advertising)  than does a firm with an inferior product.
C)  does not need to signal (advertise)  because the product's quality speaks for itself.
D)  will signal (advertise)  effectively if signaling is free.E) B) and C)
F) C) and D)

Question 12

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. The median voter is one who prefers to spend

Accepted Answer

A)  $500.
B)  $600.
C)  $800.
D)  None of the above are correct.E) B) and D)
F) A) and B)

Question 13

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 14

Table 22-14
Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired.  '
-Refer to Table 22-14. Below are lists of results for two separate elections between two candidates. In which case are both results correct?

Accepted Answer

A)  Adams wins over Brown and Brown wins over Campbell
B)  Adams wins over Brown and Campbell wins over Brown
C)  Brown wins over Adams and Brown wins over Campbell
D)  Brown wins over Adams and Campbell wins over BrownE) A) and B)
F) A) and C)

Question 15

Kim owns a small business in Denver. She travels frequently, meeting with important customers, and attending conferences. Kim hired Matt to work in the Denver office as the day-to-day general manager of the business.

Accepted Answer

A)  This is a moral hazard problem since Matt may not work as hard as Kim would like when he is not monitored.
B)  Kim choosing to hire Matt is an example of adverse selection since it is possible that Matt will not work as hard as Kim expects.
C)  Kim will most likely pay Matt a lower salary than normal since Kim will not be there to monitor Matt's work effort, and since Matt will not likely work hard knowing Kim cannot monitor his effort.
D)  Kim is the agent and Matt is the principal.E) All of the above
F) A) and C)

Question 16

The Condorcet paradox

Accepted Answer

A)  demonstrates that the order in which one votes on options may influence the outcome.
B)  demonstrates that majority voting by itself may not reveal the outcome that society wants.
C)  disproves Arrow's impossibility theorem.
D)  Both a and b are correct.E) A) and D)
F) B) and C)

Question 17

Which of the following is an example of moral hazard?

Accepted Answer

A)  a driver is arrested for drunk driving
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 D)
F) All of the above

Question 18

Table 22-12
The following table shows the preferences for the five voters in a city regarding how to deal with the city's diseased trees.  A = do nothing
B = follow the expert's advice to remove every tree
C = remove every 4th tree now and perhaps more later
D = use an untested spraying alternative
-Refer to Table 22-12. Consider the public policy for dealing with the diseased trees. Using a Borda count with 4 points assigned to the first choice, 3 points assigned to the second choice, 2 points assigned to the third choice, and 1 point assigned to the fourth choice, which policy wins?

Accepted Answer

A)  A
B)  B
C)  C
D)  DE) None of the above
F) B) and C)

Question 19

Table 22-12
The following table shows the preferences for the five voters in a city regarding how to deal with the city's diseased trees.  A = do nothing
B = follow the expert's advice to remove every tree
C = remove every 4th tree now and perhaps more later
D = use an untested spraying alternative
-Refer to Table 22-12. Consider the public policy for dealing with diseased trees. Based on the preferences in the table, which of the following statements is correct?

Accepted Answer

A)  Outcome D is preferred to outcome C overall.
B)  Outcome B is preferred to outcome C overall.
C)  Outcome D is preferred to outcome B overall.
D)  Outcome A is preferred to outcome D overall.E) All of the above
F) A) and B)

Question 20

Table 22-5
The citizens of Anytown will decide whether to build a new library, a recreation center, or an arena. 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 22-5. If (1)  the first vote pits "library" against "arena," and (2)  the second vote pits "recreation center" against the winner of the first vote, then the outcome is as follows:

Accepted Answer

A)  "Library" wins the first vote and "library" wins the second vote, so they build a library.
B)  "Library" wins the first vote and "recreation center" wins the second vote, so they build a recreation center.
C)  "arena" wins the first vote and "arena" wins the second vote, so they build an arena.
D)  "arena" wins the first vote and "recreation center" wins the second vote, so they build a recreation center.E) All of the above
F) A) and D)

Exam 22: Frontiers in Microeconomics

Correct Answer
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Correct Answer
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Normally, we expect voters' preferences to exhibit a property called

Correct Answer
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Kim owns a small business in Denver. She travels frequently, meeting with important customers, and attending conferences. Kim hired Matt to work in the Denver office as the day-to-day general manager of the business.

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Under majority rule, the order in which items are voted on is

Correct Answer
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Correct Answer
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The Condorcet paradox

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A firm with a very good product

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

Correct Answer
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Evidence suggests that, in the real world, people appear to care about fairness

Correct Answer
verified

Severe adverse-selection problems may result in

Correct Answer
verified

Which of the following is an example of moral hazard?

Correct Answer
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Correct Answer
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Correct Answer
verified

The Condorcet paradox tells us that, even though it is impossible to satisfy all of Arrow's properties of a desirable voting system, pairwise majority voting will always satisfy transitivity.

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...
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Exam 22: Frontiers in Microeconomics

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Normally, we expect voters' preferences to exhibit a property called

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Kim owns a small business in Denver. She travels frequently, meeting with important customers, and attending conferences. Kim hired Matt to work in the Denver office as the day-to-day general manager of the business.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under majority rule, the order in which items are voted on is

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Correct AnswerverifiedShow Answer

The Condorcet paradox

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A firm with a very good product

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Correct AnswerverifiedShow Answer

In corporations, a principal-agent problem can arise when

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Evidence suggests that, in the real world, people appear to care about fairness

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Severe adverse-selection problems may result in

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Which of the following is an example of moral hazard?

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Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Condorcet paradox tells us that, even though it is impossible to satisfy all of Arrow's properties of a desirable voting system, pairwise majority voting will always satisfy transitivity.

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

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delay payment/tie pa...
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