Question 1

Table 23-2
Suppose a town is to vote on three possible locations for a new park: A, B, or C. The preferences are in Table 23-2. Suppose the mayor decides on the following Borda count voting scheme: For each option, we will give one point for last place, two points for second last, and three points for the third last etc. The outcome with the most points is the winner.
 
-Refer to the information provided. The winner of this Borda count will be:

Accepted Answer

A)  option A.
B)  option B.
C)  option C.
D)  a tie between option A and BE) B) and C)
F) None of the above

Question 2

When applied to the labour market, the adverse selection model suggests that:

Accepted Answer

A)  relatively talented workers are more likely to remain with a particular firm if the firm cuts the wages it pays
B)  firms have perfect knowledge about the ability of workers
C)  a firm may choose to pay an above-equilibrium wage to attract a better mix of workers
D)  all workers have identical abilitiesE) B) and D)
F) C) and D)

Question 3

Adverse selection is a problem that arises in markets where:

Accepted Answer

A)  the seller knows more about the attributes of the good being sold than the buyer does
B)  the buyer knows more about the attributes of the good being sold than the seller does
C)  only used cars are bought and sold.
D)  both buyers and sellers have the same knowledge about the attributes of the goodE) C) and D)
F) All of the above

Question 4

If signalling is applied to advertising:

Accepted Answer

A)  a firm with a good product reaps a relatively small benefit from advertising
B)  firms recognise the possibility of repeated customers
C)  it is irrational for a firm with a good product to pay for the cost of the signal
D)  all firms have the same incentive to advertiseE) C) and D)
F) A) and B)

Question 5

In the context of a voting system, independence of irrelevant alternatives means that:

Accepted Answer

A)  if everyone prefers A to B, then A should beat B.
B)  if A beats B, and B beats C, then A should beat C.
C)  there this no person that always gets his way, regardless of everyone else's preferences
D)  the ranking between any two outcomes A and B should not depend on whether some third outcome C is also availableE) A) and B)
F) A) and C)

Question 6

Suppose an insurance company successfully screens drivers by offering two contracts. One contract is a policy with high premiums and comprehensive coverage, and the other a policy with low premiums and $1500 excess on each claim. This means that:

Accepted Answer

A)  risky drivers and safe drivers would both select the high premium contract
B)  risky drivers would select the high premium contract and safe drivers would select the low premium contract
C)  risky drivers would select the low premium contract and safe drivers would select the high premium contract
D)  risky drivers and safe drivers would both select the low premium contractE) A) and B)
F) All of the above B

Question 7

The incentive of imperfectly monitored workers to shirk can be reduced by:

Accepted Answer

A)  higher levels of monitoring and offering year-end bonuses
B)  higher levels of monitoring and lower wages
C)  lower levels of monitoring and offering year-end bonuses
D)  lower levels of monitoring and lower wagesE) A) and C)
F) All of the above

Question 8

People tend to underestimate their own abilities.

Accepted Answer

A) True 
 B)False

Question 9

The social scientist Herbert Simon is famous for his work in:

Accepted Answer

A)  asymmetric information
B)  signalling theory
C)  voting systems
D)  behavioural economicsE) A) and B)
F) C) and D)

Question 10

If signalling is applied to advertising:

Accepted Answer

A)  a firm with a good product reaps a relatively small benefit from advertising
B)  firms ignore the possibility of repeated customers
C)  it is rational for a firm with a good product to pay for the cost of the signal
D)  all firms have the same incentive to advertiseE) None of the above
F) C) and D)

Question 11

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is an example of adverse selection?

Accepted Answer

A)  employees shirking because they believe they can get away with reduced work
B)  a traveller who is prone to forgetting her bags purchasing full-comprehensive travel insurance
C)  a well-informed IT expert purchasing a new laptop
D)  a petrol station displaying its prices alongside a busy highwayE) A) and D)
F) A) and C)

Question 13

The insights of behavioural economics suggest that assuming rational behaviour of consumers is not always correct.

Accepted Answer

A) True 
 B)False

Question 14

Table 23-1
 
-Refer to Table 23-1. With pairwise voting, and starting with a comparison between Daft Punk and Paul Kelly, which album will they listen to?

Accepted Answer

A)  Daft Punk
B)  Paul Kelly
C)  Najwa Karam
D)  it cannot be determinedE) A) and C)
F) All of the above C

Question 15

Economists:

Accepted Answer

A)  have always suggested that people are rational maximisers, not satisfiers
B)  use basic psychological insights in the field of behavioural economics
C)  generally argue that people do not weigh the costs and benefits of different courses of action
D)  assume individuals and firms do not face constraints in the marketE) None of the above
F) B) and C)

Question 16

Parties in a two-party political system tend to put forward similar policies because:

Accepted Answer

A)  of the median voter theorem
B)  of the average voter theorem
C)  politicians find it hard to think of new policies
D)  voters don't like things to changeE) A) and C)
F) A) and D)

Question 17

The median voter is:

Accepted Answer

A)  any voter in a democratic system
B)  the voter at the start of a distribution
C)  the voter at the end of a distribution
D)  the voter exactly in the middle of a distributionE) A) and C)
F) All of the above

Question 18

The marrying of the fields of psychology and economics has led to an explosion in the field of behavioural economics. Give three explanations of some of the insights of behavioural economics and examples of when each insight might apply.

Accepted Answer

Any three of the following will suffice:...

Question 19

Suppose two players are playing the ultimatum game, and Player A has to propose a division of $100 between the two players. What is the Nash equilibrium for this game, and is it the usual result of the game when it is played? What does it tell us about people's attitudes towards fairness?

Accepted Answer

The Nash equilibrium for this game is for player A to propose that A gets $99 and B gets $1.
In reality, people who play the ultimatum game usually end up proposing more equitable splits.
This tells us that people have an innate sense of fairness and care about fairness as an outcome.

Question 20

Adverse selection is a problem that arises in markets where the seller knows more about the attributes of the good being sold than the buyer does.

Accepted Answer

A) True 
 B)False

Exam 23: Frontiers of Microeconomics

Correct Answer
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When applied to the labour market, the adverse selection model suggests that:

Correct Answer
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Adverse selection is a problem that arises in markets where:

Correct Answer
verified

If signalling is applied to advertising:

Correct Answer
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In the context of a voting system, independence of irrelevant alternatives means that:

Correct Answer
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Suppose an insurance company successfully screens drivers by offering two contracts. One contract is a policy with high premiums and comprehensive coverage, and the other a policy with low premiums and $1500 excess on each claim. This means that:

Correct Answer
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B

The incentive of imperfectly monitored workers to shirk can be reduced by:

Correct Answer
verified

People tend to underestimate their own abilities.

Correct Answer
verified

The social scientist Herbert Simon is famous for his work in:

Correct Answer
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If signalling is applied to advertising:

Correct Answer
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Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Correct Answer
verified

Which of the following is an example of adverse selection?

Correct Answer
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The insights of behavioural economics suggest that assuming rational behaviour of consumers is not always correct.

Correct Answer
verified

Table 23-1 -Refer to Table 23-1. With pairwise voting, and starting with a comparison between Daft Punk and Paul Kelly, which album will they listen to?

Correct Answer
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C

Economists:

Correct Answer
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Parties in a two-party political system tend to put forward similar policies because:

Correct Answer
verified

The median voter is:

Correct Answer
verified

The marrying of the fields of psychology and economics has led to an explosion in the field of behavioural economics. Give three explanations of some of the insights of behavioural economics and examples of when each insight might apply.

Correct Answer
verified
Any three of the following will suffice:...
View Answer

Suppose two players are playing the ultimatum game, and Player A has to propose a division of $100 between the two players. What is the Nash equilibrium for this game, and is it the usual result of the game when it is played? What does it tell us about people's attitudes towards fairness?

Adverse selection is a problem that arises in markets where the seller knows more about the attributes of the good being sold than the buyer does.

Correct Answer
verified

Exam 23: Frontiers of Microeconomics

Correct AnswerverifiedShow Answer

When applied to the labour market, the adverse selection model suggests that:

Correct AnswerverifiedShow Answer

Adverse selection is a problem that arises in markets where:

Correct AnswerverifiedShow Answer

If signalling is applied to advertising:

Correct AnswerverifiedShow Answer

In the context of a voting system, independence of irrelevant alternatives means that:

Correct AnswerverifiedShow Answer

Suppose an insurance company successfully screens drivers by offering two contracts. One contract is a policy with high premiums and comprehensive coverage, and the other a policy with low premiums and $1500 excess on each claim. This means that:

Correct AnswerverifiedB

The incentive of imperfectly monitored workers to shirk can be reduced by:

Correct AnswerverifiedShow Answer

People tend to underestimate their own abilities.

Correct AnswerverifiedShow Answer

The social scientist Herbert Simon is famous for his work in:

Correct AnswerverifiedShow Answer

If signalling is applied to advertising:

Correct AnswerverifiedShow Answer

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

Correct AnswerverifiedShow Answer

Which of the following is an example of adverse selection?

Correct AnswerverifiedShow Answer

The insights of behavioural economics suggest that assuming rational behaviour of consumers is not always correct.

Correct AnswerverifiedShow Answer

Table 23-1 -Refer to Table 23-1. With pairwise voting, and starting with a comparison between Daft Punk and Paul Kelly, which album will they listen to?

Correct AnswerverifiedC

Economists:

Correct AnswerverifiedShow Answer

Parties in a two-party political system tend to put forward similar policies because:

Correct AnswerverifiedShow Answer

The median voter is:

Correct AnswerverifiedShow Answer

The marrying of the fields of psychology and economics has led to an explosion in the field of behavioural economics. Give three explanations of some of the insights of behavioural economics and examples of when each insight might apply.

Correct AnswerverifiedAny three of the following will suffice:...View AnswerShow Answer

Suppose two players are playing the ultimatum game, and Player A has to propose a division of $100 between the two players. What is the Nash equilibrium for this game, and is it the usual result of the game when it is played? What does it tell us about people's attitudes towards fairness?

Adverse selection is a problem that arises in markets where the seller knows more about the attributes of the good being sold than the buyer does.

Correct AnswerverifiedShow Answer

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B

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C

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Any three of the following will suffice:...
View Answer

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