Question 1

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 first vote pits Italy against Greece and the second vote pits Ireland against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A)   Italy wins the first vote and Ireland wins the second vote, so they go to Ireland.
B)   Italy wins the first vote and Italy wins the second vote, so they go to Italy.
C)   Greece wins the first vote and Greece wins the second vote, so they go to Greece.
D)   Greece wins the first vote and Ireland wins the second vote, so they go to Ireland.E) A) and D)
F) B) and C)

Question 2

Suppose that an economics department is offering a student exchange program with a university in Giessen,Germany.If the department requires students to submit an essay in order to be considered for the program,the essay may be an example of a(n)

Accepted Answer

A)   signal.
B)   screen.
C)   efficiency wage.
D)   principal.E) A) and B)
F) A) and C)

Question 3

Which of the following is an example of screening?

Accepted Answer

A)   When someone is applying for a job, the employer checks references to determine the previous work habits of the applicant.
B)   When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company.
C)   When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 4

The Condorcet paradox

Accepted Answer

A)   proved that the Arrow impossibility theorem is wrong.
B)   was proved wrong by the Arrow impossibility theorem.
C)   serves as an example of the Arrow impossibility theorem.
D)   pertains to voting systems, whereas Arrow's Impossibility Theorem does not.E) A) and B)
F) B) and C)

Question 5

Evidence from experiments in which real people play the ultimatum game supports the idea that people

Accepted Answer

A)   are rational wealth-maximizers.
B)   tend to be driven by fairness, without regard for their own self-interest.
C)   are driven by both fairness and self-interest.
D)   have trouble calculating their own levels of wealth.E) A) and D)
F) C) and D)

Question 6

The Condorcet paradox demonstrates that the order in which people vote on choices may influence the final outcome.

Accepted Answer

A) True 
 B)False

Question 7

If the seller of a used car offers a limited warranty,the warranty is an example of a(n)

Accepted Answer

A)   signal.
B)   screen.
C)   efficiency wage.
D)   agent.E) B) and D)
F) A) and C)

Question 8

Which of the following is not an example of signaling?

Accepted Answer

A)   screening
B)   advertising
C)   getting an education
D)   gift givingE) A) and B)
F) None of the above

Question 9

In an instant runoff vote,candidates without any first place votes are eliminated.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is not correct?

Accepted Answer

A)   Based on studies of human decision making, most people value fairness.
B)   Based on studies of human decision making, some people's preference are inconsistent over time.
C)   Government intervention is the best remedy for the problems caused by asymmetric information.
D)   Advertising can be an example of a company signaling the quality of its products.E) B) and D)
F) B) and C)

Question 11

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

Accepted Answer

A)   If A is preferred to B, then B is less preferred than A.
B)   If A is preferred to B, and B is preferred to C, then A is preferred to C.
C)   If A is preferred to B and B is preferred to C, then the preference for A over B is stronger than the preference for B over C.
D)   If A is preferred to C, then there exists B such that A is preferred to B and C is preferred to A.E) None of the above
F) A) and D)

Question 12

The classic example of adverse selection is the

Accepted Answer

A)   market for used cars.
B)   market for new cars.
C)   relationship between shareholders and managers.
D)   relationship between a coach and an athlete.E) A) and D)
F) B) and C)

Question 13

The adverse selection problem is a likely explanation for the fact that

Accepted Answer

A)   some parents use video cameras to monitor the nannies caring for their children.
B)   some corporate managers were recently sent to prison for enriching themselves at the expense of shareholders.
C)   people in average health may be discouraged from buying health insurance by the high price.
D)   gifts can be interpreted as signals.E) A) and B)
F) A) and C)

Question 14

The assertion that the median voter is "king" refers directly to the result established by the

Accepted Answer

A)   Arrow impossibility theorem.
B)   Condorcet paradox.
C)   median voter theorem.
D)   Borda mechanism.E) None of the above
F) B) and C)

Question 15

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Accepted Answer

A)   The firm cares less about profit and more about cost when there are many competitors in the market.
B)   The firm offers an employee-incentive program in which employees share in the firm's profits.
C)   The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm.
D)   The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.E) None of the above
F) All of the above

Question 16

Scenario 22-5
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 22-5.If the vote were conducted according to a Borda count system where each person's first choice receives 4 points,second choice 3 points,third choice 2 points,and fourth choice 1 point,the election winner would be

Accepted Answer

A)   pizza.
B)   ravioli.
C)   lasagne.
D)   spaghetti.E) C) and D)
F) A) and B)

Question 17

The fact that someone with a high risk of medical problems is likely to buy a large amount of health insurance is an example of

Accepted Answer

A)   adverse selection.
B)   monitoring.
C)   moral hazard.
D)   screening.E) A) and D)
F) B) and C)

Question 18

The unanimity property states that the ranking between any two outcomes should not depend on whether some third outcome is available.

Accepted Answer

A) True 
 B)False

Question 19

The problem of moral hazard is a problem of hidden action.

Accepted Answer

A) True 
 B)False

Question 20

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 first vote pits Ireland against Greece and the second vote pits Italy against the winner of the first vote,then the outcome is as follows:

Accepted Answer

A)   Ireland wins the first vote and Italy wins the second vote, so they go to Italy.
B)   Ireland wins the first vote and Ireland wins the second vote, so they go to Ireland.
C)   Greece wins the first vote and Greece wins the second vote, so they go to Greece.
D)   Greece wins the first vote and Italy wins the second vote, so they go to Italy.E) A) and C)
F) A) and B)

Exam 22: Frontiers in Microeconomics.

The unanimity property states that the ranking between any two outcomes should not depend on whether some third outcome is available.

Correct Answer
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Correct Answer
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The adverse selection problem is a likely explanation for the fact that

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

Correct Answer
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Correct Answer
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The fact that someone with a high risk of medical problems is likely to buy a large amount of health insurance is an example of

Correct Answer
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Evidence from experiments in which real people play the ultimatum game supports the idea that people

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

Correct Answer
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Correct Answer
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In an instant runoff vote,candidates without any first place votes are eliminated.

Correct Answer
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The Condorcet paradox demonstrates that the order in which people vote on choices may influence the final outcome.

Correct Answer
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The Condorcet paradox

Correct Answer
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The problem of moral hazard is a problem of hidden action.

Correct Answer
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Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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If the seller of a used car offers a limited warranty,the warranty is an example of a(n)

Correct Answer
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The assertion that the median voter is "king" refers directly to the result established by the

Correct Answer
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The classic example of adverse selection is the

Correct Answer
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Which of the following is not an example of signaling?

Correct Answer
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Suppose that an economics department is offering a student exchange program with a university in Giessen,Germany.If the department requires students to submit an essay in order to be considered for the program,the essay may be an example of a(n)

Correct Answer
verified

Exam 22: Frontiers in Microeconomics.

The unanimity property states that the ranking between any two outcomes should not depend on whether some third outcome is available.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The adverse selection problem is a likely explanation for the fact that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The fact that someone with a high risk of medical problems is likely to buy a large amount of health insurance is an example of

Correct AnswerverifiedShow Answer

Evidence from experiments in which real people play the ultimatum game supports the idea that people

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Which of the following is an example of screening?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In an instant runoff vote,candidates without any first place votes are eliminated.

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The Condorcet paradox demonstrates that the order in which people vote on choices may influence the final outcome.

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The Condorcet paradox

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The problem of moral hazard is a problem of hidden action.

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Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

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Which of the following statements is not correct?

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If the seller of a used car offers a limited warranty,the warranty is an example of a(n)

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The assertion that the median voter is "king" refers directly to the result established by the

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The classic example of adverse selection is the

Correct AnswerverifiedShow Answer

Which of the following is not an example of signaling?

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Suppose that an economics department is offering a student exchange program with a university in Giessen,Germany.If the department requires students to submit an essay in order to be considered for the program,the essay may be an example of a(n)

Correct AnswerverifiedShow Answer

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