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Exam 22: Frontiers of Microeconomics

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Question 191

True/False

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If A is preferred to B and C is preferred to D, then B must be preferred to C to satisfy transitivity.

A) True
B) False

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Question 192

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Which of the following is not an example of a systematic mistake that people make?

A) When asked to predict how many movie stars he can list, Ed says 200 but when put to the test he can only name 130.
B) Susan watched a home improvement show in which a contractor installed a faulty deck which collapsed within 2 years of installation. She is now concerned about the safety of her own deck.
C) Kate's manager asks her to work additional hours for which she will be paid her usual hourly wage. Kate weighs the value of her leisure time against the additional wages before responding to her manager.
D) Bill has purchased Skillman tools for years and has recently noticed a decline in quality and durability of Skillman tools. Still, when he needs a new drill, he purchases a Skillman brand drill.

E) B) and C)
F) A) and D)

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Question 193

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Scenario 22-6 Shana owns a boutique that sells high­end women's clothing and accessories. Katie works part-time at the boutique and frequently is the only employee in this small store. Shana pays Katie a wage that is higher than the market wage for this type of job. When the store is not full of customers, Katie diligently works on displays and cleans to keep the store looking its best. Belinda is a customer in the store who asks Katie's opinion on the quality of some jeans she is considering purchasing. Katie tells her the quality is great even though she's had several other customers return them due to flaws. Magda is another customer who is returning a necklace without volunteering that a gem is missing. -Refer to Scenario 22-6. What is the term for the type of wage Shana pays Katie?

The median voter

Table 22-15 Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below. -Refer to Table 22-15. If the vote were conducted according to a Borda count system where each person's first choice receives 3 points, second choice 2 points, and third choice 1 point,

Table 22-1 Three friends -- Linda, Stephanie, and Jamie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: France, Greece, or Italy. They also agree that they will have two pairwise votes to determine where to go on vacation, 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 22-1. If the first vote pits Greece against Italy and the second vote pits France against the winner of the first vote, then the outcome is as follows:

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.

Which of the following statements captures the meaning of transitivity of preferences?

Table 22-1 Three friends -- Linda, Stephanie, and Jamie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: France, Greece, or Italy. They also agree that they will have two pairwise votes to determine where to go on vacation, 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 22-1. If the friends change their minds and decide to choose a vacation destination using a Borda count, then

An example of screening is a company spending a large sum on advertising to convey the high quality of its product.

When economists assume that people are rational, they assume that

Table 22-1 Three friends -- Linda, Stephanie, and Jamie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: France, Greece, or Italy. They also agree that they will have two pairwise votes to determine where to go on vacation, 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 22-1. If the first vote pits France against Greece and the second vote pits Italy against the winner of the first vote, then the outcome is as follows:

The field of political economy

Table 22-9 Voter Type -Refer to Table 22-9. The table shows the preferences of four types of voters over four possible outcomes: A, B, C, D. In addition, the table shows the percentage of voters of each type. Based on this information, which of the following statements is false?

Which of the following is a reason to think that government action may not be valuable to improve market outcomes with asymmetric information?

Scenario 22-4 Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza. Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne. Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti. -Refer to Scenario 22-4. If, before any votes were cast, ravioli was eliminated from the choices, the median voter's first choice would be

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. Which of the following statements is correct regarding the Condorcet paradox and the results of pairwise voting by Allen, Brian, and Cody?

Evidence from studies of workers' choices on whether to participate in 401(k) plans suggests that the workers' behavior appears to exhibit

Table 22-23 The town of Franklin is facing a severe budget shortage. The town administrator has proposed four options to balance the budget: increase property taxes (taxes), cut the school arts budget (arts), turn off half of the streetlights in the town (streetlights), reduce police patrols (police). Exactly one of the four 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. Voter Type -Refer to Table 22-23. If the town administrator asks the people to first choose between cutting the arts program and turning off half of the streetlights, and then choose between the winner of the first election and reducing police patrols, and then choose between the winner of the second election and increasing taxes, which option will win each vote?

Table 22-3 Three family members -- Seamus, Maeve, and Siobhan -- are deciding what type of movie to attend. The three choices are an action adventure, comedy, or horror. The first, second, and third choices for each person are as indicated in the table below. -Refer to Table 22-3. If the voting method is a Borda count, which alternative will be chosen?