Question 1

In the context of a voting system, unanimity means that:

Accepted Answer

A)  if option X beats option Y, and Y beats Z, then X should beat Z
B)  if A beats B, and B beats C, then A should beat C
C)  the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available
D)  if everyone prefers option X to option Y, then X should beat YE) B) and D)
F) A) and C)

Question 2

A difference in access to relevant knowledge is called information symmetry.

Accepted Answer

A) True 
 B)False

Question 3

Signalling refers to actions taken by an informed party for the purpose of credibly revealing their private information.

Accepted Answer

A) True 
 B)False

Question 4

What is moral hazard and how might it manifest in an employment relationship? What can an employer do to reduce the problem of moral hazard?

Accepted Answer

.
Moral hazard occurs when an agent perf...

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

In the context of a voting system, independence of irrelevant alternatives means that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.

Accepted Answer

A) True 
 B)False

Question 7

Economists tend to:

Accepted Answer

A)  try to expand their understanding of human behaviour and society
B)  ignore the workings of political institutions
C)  tend to assume no hidden actions or characteristics when analysing insurance, labour and used car markets
D)  all of the aboveE) All of the above
F) B) and D)

Question 8

The Condorcet paradox illustrates how:

Accepted Answer

A)  choice of voting order has no impact on the outcome of a democratic election
B)  majority voting by itself can tell us what outcome of society really wants
C)  choice of voting order can have an impact on the outcome of a democratic election
D)  aggregating individual preferences into preferences for society as a whole is relatively straightforward.E) A) and B)
F) B) and C)

Question 9

An implication of asymmetric information in the insurance market is that people in average health may be encouraged to purchase health insurance.

Accepted Answer

A) True 
 B)False

Question 10

Private markets sometimes deal with asymmetric information through signalling and screening.

Accepted Answer

A) True 
 B)False

Question 11

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 B)
F) A) and C)

Question 12

The lack of caution exhibited by individuals and families who are privately insured is an example of moral hazard.

Accepted Answer

A) True 
 B)False

Question 13

Behavioural economists argue that:

Accepted Answer

A)  people are rational maximisers
B)  consumers always choose the best possible course of action
C)  people are flexible and change their beliefs in response to new evidence
D)  people largely make decisions that are merely good enoughE) A) and D)
F) A) and C)

Question 14

Employers can reduce the incentive of imperfectly monitored workers to shirk by:

Accepted Answer

A)  better monitoring
B)  lower wages
C)  avoiding year-end bonuses
D)  none of the aboveE) None of the above
F) B) and D)

Question 15

Arrow's impossibility theorem suggests that a voting system will be ideal if the properties of intransitivity and dependence of irrelevant alternatives are satisfied.

Accepted Answer

A) True 
 B)False

Question 16

In the case where landlords require tenants to pay security deposits:

Accepted Answer

A)  the landlord is the agent and the tenant is the principal
B)  the landlord is the principal and the tenant is the agent
C)  both the landlord and the tenant are agents
D)  both the landlord and the tenant are principalsE) A) and B)
F) A) and C)

Question 17

A difference in access to relevant knowledge is called:

Accepted Answer

A)  an information symmetry
B)  an information asymmetry
C)  signalling
D)  screeningE) None of the above
F) A) and C)

Question 18

Arrow identified unanimity and transitivity as desirable properties for a voting system.

Accepted Answer

A) True 
 B)False

Question 19

If signalling is applied to advertising:

Accepted Answer

A)  not all firms have the same incentive to advertise
B)  firms ignore 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)  a firm with a good product reaps a relatively small benefit from advertisingE) A) and C)
F) B) and D)

Question 20

Behavioural economics:

Accepted Answer

A)  brings some of the insights from psychology into the study of economic issues
B)  tends to view human behaviour as less complex than that found in conventional economic theory
C)  applies the tools of economics to understand the functioning of government
D)  includes topics such as adverse selection and moral hazardE) A) and B)
F) A) and C)

Exam 23: Frontiers of Microeconomics

In the case where landlords require tenants to pay security deposits:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Behavioural economics:

Correct AnswerverifiedShow Answer

Arrow identified unanimity and transitivity as desirable properties for a voting system.

Correct AnswerverifiedShow Answer

Private markets sometimes deal with asymmetric information through signalling and screening.

Correct AnswerverifiedShow Answer

In the context of a voting system, unanimity means that:

Correct AnswerverifiedShow Answer

Employers can reduce the incentive of imperfectly monitored workers to shirk by:

Correct AnswerverifiedShow Answer

An implication of asymmetric information in the insurance market is that people in average health may be encouraged to purchase health insurance.

Correct AnswerverifiedShow Answer

If signalling is applied to advertising:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the context of a voting system, independence of irrelevant alternatives means that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.

Correct AnswerverifiedShow Answer

Economists tend to:

Correct AnswerverifiedShow Answer

Signalling refers to actions taken by an informed party for the purpose of credibly revealing their private information.

Correct AnswerverifiedShow Answer

Behavioural economists argue that:

Correct AnswerverifiedShow Answer

A difference in access to relevant knowledge is called information symmetry.

Correct AnswerverifiedShow Answer

The Condorcet paradox illustrates how:

Correct AnswerverifiedShow Answer

Arrow's impossibility theorem suggests that a voting system will be ideal if the properties of intransitivity and dependence of irrelevant alternatives are satisfied.

Correct AnswerverifiedShow Answer

What is moral hazard and how might it manifest in an employment relationship? What can an employer do to reduce the problem of moral hazard?

Correct Answerverified.Moral hazard occurs when an agent perf...View AnswerShow Answer

A difference in access to relevant knowledge is called:

Correct AnswerverifiedShow Answer

The lack of caution exhibited by individuals and families who are privately insured is an example of moral hazard.

Correct AnswerverifiedShow Answer

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Moral hazard occurs when an agent perf...
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