Question 1

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Accepted Answer

Asymmetric information is present when t...

Question 2

Economic experiments show that people care more about winning a game than about its intrinsic fairness.

Accepted Answer

A) True 
 B)False

Question 3

The classic example of adverse selection is the market for used cars.

Accepted Answer

A) True 
 B)False

Question 4

Majority rule will produce the outcome most preferred by the median voter.

Accepted Answer

A) True 
 B)False

Question 5

Table 22-14
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 22-14.If the family uses a Borda count to make their decision,what is their vacation destination?

Accepted Answer

A)   Grand Canyon
B)   Sea World
C)   Opryland
D)   DisneylandE) C) and D)
F) None of the above

Question 6

Which of the following is a characteristic of a corporation but not of a small family-owned business?

Accepted Answer

A)   The firm buys inputs in markets for the factors of production.
B)   The firm sells output in markets for goods and services.
C)   The firm is guided in its decisions by the objective of profit maximization.
D)   The firm faces a principal-agent problem created by the separation of ownership and control.E) A) and B)
F) All of the above

Question 7

Suppose that an economics professor selects two students,Byron and Regina,to participate in a classroom experiment.The professor gives Byron ten $1 bills.Byron must pick an allocation of the ten $1 bills to offer to Regina.If Regina accepts the allocation,each student keeps his or her portion of the money.If Regina rejects the allocation,the professor keeps the $10,and each student receives nothing.Byron selects $9 for himself and $1 for Regina.Based on the studies of human decision making,which of the following statements is correct?

Accepted Answer

A)   If Regina accepts the offer, she is behaving rationally.
B)   If Regina rejects the offer, she may value fairness more than $1.
C)   If Regina rejects the offer, Byron made a bad choice by trying to keep $9 for himself.
D)   Any of the above could be correct.E) A) and B)
F) A) and C)

Question 8

How have insights from the field of psychology influenced the thinking of economists in recent years?

Accepted Answer

Insights from psychology have led some e...

Question 9

Which of the following is an example of signaling?

Accepted Answer

A)   Pat is considering the purchase of a used car. Before making the purchase he has the car checked by an auto mechanic.
B)   Zach is applying for a new life insurance policy. Before writing the policy, the insurance company requires Zach to be examined by a doctor.
C)   Denise is applying for a new job. Before hiring her, the firm requires Denise to take a drug test.
D)   Marcus is planning to ask for Chaquila's hand in marriage. Before asking her, he buys her a box of her favorite chocolates and takes her to dinner at her favorite restaurant.E) A) and D)
F) A) and C)

Question 10

Adverse selection

Accepted Answer

A)   occurs when the overall quality of choices facing a consumer is very low.
B)   is a greater problem for employees than employers.
C)   occurs more frequently in the market for new cars than used cars.
D)   is not easily remedied by free markets.E) A) and B)
F) All of the above

Question 11

The suggestion that people are "satisficers" is similar to the view that people

Accepted Answer

A)   are wealth-maximizers.
B)   exhibit "bounded rationality."
C)   go to a lot of trouble to weigh costs and benefits before choosing a course of action.
D)   change their minds often.E) A) and B)
F) B) and D)

Question 12

Your friend works at a coffee shop on campus and regularly gives away free coffee to you and your friends when you visit.This is an example of

Accepted Answer

A)   a moral hazard problem.
B)   adverse selection.
C)   behavioral economics.
D)   signaling.E) B) and C)
F) B) and D)

Question 13

Arrow's impossibility theorem states that the majority rule fails to produce transitive preferences for society.

Accepted Answer

A) True 
 B)False

Question 14

Table 22-1
Three friends -- Tricia, Sarah, and Katie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: Ireland, Italy, or Greece. 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

Accepted Answer

A)   the friends will go to Ireland.
B)   the friends will go to Italy.
C)   the friends will go to Greece.
D)   A Borda count will not result in a single winner in this case.E) B) and C)
F) C) and D)

Question 15

Table 22-8
 
-Refer to Table 22-8.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?

Accepted Answer

A)   Outcome D is preferred to outcome C overall.
B)   Outcome C is preferred to outcome B overall.
C)   Outcome B is preferred to outcome D overall.
D)   Outcome D is preferred to outcome A overall.E) A) and B)
F) A) and C)

Question 16

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 experimental evidence shows,he will likely propose that

Accepted Answer

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

Question 17

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

Accepted Answer

A)   Arrow impossibility theorem.
B)   Condorcet paradox.
C)   pairwise voting proposition.
D)   median voter theorem.E) All of the above
F) A) and B)

Question 18

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow used the term "unanimity" to mean

Accepted Answer

A)   A beats B only if everyone prefers A to B.
B)   if everyone prefers A to B, then A beats B.
C)   if A beats B and B beats C, then A must best C.
D)   everyone who is eligible to vote must vote; otherwise, the outcome is invalid.E) C) and D)
F) A) and B)

Question 19

In a vote between options A,B,and C,option C wins.When option B is eliminated and a vote is taken between option A and option C,option A wins.The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

Accepted Answer

A)   Unanimity
B)   Transitivity
C)   Independence of irrelevant alternatives
D)   No dictatorsE) B) and D)
F) A) and B)

Question 20

In the case of a moral-hazard problem,which of the following is not a way for the principal to encourage the agent to act more responsibly?

Accepted Answer

A)   the principal could better monitor the agent
B)   the principal could pay the agent above-equilibrium wages
C)   the principal could delay payment to the agent
D)   the principal could pay the agent below-equilibrium wagesE) None of the above
F) A) and D)

Exam 22: Frontiers in Microeconomics.

Your friend works at a coffee shop on campus and regularly gives away free coffee to you and your friends when you visit.This is an example of

Correct Answer
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Correct Answer
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Which of the following is an example of signaling?

Correct Answer
verified

Which of the following is a characteristic of a corporation but not of a small family-owned business?

Correct Answer
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How have insights from the field of psychology influenced the thinking of economists in recent years?

Correct Answer
verified
Insights from psychology have led some e...
View Answer

Table 22-8 -Refer to Table 22-8.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?

Correct Answer
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Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

Correct Answer
verified

Correct Answer
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Arrow's impossibility theorem states that the majority rule fails to produce transitive preferences for society.

Correct Answer
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In a vote between options A,B,and C,option C wins.When option B is eliminated and a vote is taken between option A and option C,option A wins.The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

Correct Answer
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In the case of a moral-hazard problem,which of the following is not a way for the principal to encourage the agent to act more responsibly?

Correct Answer
verified

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow used the term "unanimity" to mean

Correct Answer
verified

Adverse selection

Correct Answer
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Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Correct Answer
verified
Asymmetric information is present when t...
View Answer

The classic example of adverse selection is the market for used cars.

Correct Answer
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The suggestion that people are "satisficers" is similar to the view that people

Correct Answer
verified

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 experimental evidence shows,he will likely propose that

Correct Answer
verified

Economic experiments show that people care more about winning a game than about its intrinsic fairness.

Correct Answer
verified

Majority rule will produce the outcome most preferred by the median voter.

Correct Answer
verified

Exam 22: Frontiers in Microeconomics.

Your friend works at a coffee shop on campus and regularly gives away free coffee to you and your friends when you visit.This is an example of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of signaling?

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a corporation but not of a small family-owned business?

Correct AnswerverifiedShow Answer

How have insights from the field of psychology influenced the thinking of economists in recent years?

Correct AnswerverifiedInsights from psychology have led some e...View AnswerShow Answer

Table 22-8 -Refer to Table 22-8.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?

Correct AnswerverifiedShow Answer

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Arrow's impossibility theorem states that the majority rule fails to produce transitive preferences for society.

Correct AnswerverifiedShow Answer

In a vote between options A,B,and C,option C wins.When option B is eliminated and a vote is taken between option A and option C,option A wins.The voting system used fails to satisfy which of Arrow's properties of a desirable voting system?

Correct AnswerverifiedShow Answer

In the case of a moral-hazard problem,which of the following is not a way for the principal to encourage the agent to act more responsibly?

Correct AnswerverifiedShow Answer

In his 1951 book,Social Choice and Individual Values,Kenneth Arrow used the term "unanimity" to mean

Correct AnswerverifiedShow Answer

Adverse selection

Correct AnswerverifiedShow Answer

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Correct AnswerverifiedAsymmetric information is present when t...View AnswerShow Answer

The classic example of adverse selection is the market for used cars.

Correct AnswerverifiedShow Answer

The suggestion that people are "satisficers" is similar to the view that people

Correct AnswerverifiedShow Answer

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 experimental evidence shows,he will likely propose that

Correct AnswerverifiedShow Answer

Economic experiments show that people care more about winning a game than about its intrinsic fairness.

Correct AnswerverifiedShow Answer

Majority rule will produce the outcome most preferred by the median voter.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Insights from psychology have led some e...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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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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Asymmetric information is present when t...
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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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Correct Answer
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Correct Answer
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