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Which of the following students exhibits satisficing behavior?


A) Mick studies his economics notes every night so that he can be sure to earn a perfect score on his exam.
B) Bill studies his economics notes for a few hours the night before the test because he will be satisfied with a C on his exam.
C) Marguerite studies extensively as she will only be satisfied with a very high score.
D) None of these students exhibits satisficing behavior.

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

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Scenario 22-2 The following table shows the preferences for the five voters in a city regarding how to deal with the city's diseased trees. Scenario 22-2 The following table shows the preferences for the five voters in a city regarding how to deal with the city's diseased trees. A = do nothing B = follow the expert's advice to remove every tree C = remove every 4th tree now and perhaps more later D = use an untested spraying alternative -Refer to Scenario 22-2.Consider the public policy for dealing with the diseased trees.Using a Borda count with 4 points assigned to the first choice,3 points assigned to the second choice,2 points assigned to the third choice,and 1 point assigned to the fourth choice,which policy wins? A) A B) B C) C D) D A = do nothing B = follow the expert's advice to remove every tree C = remove every 4th tree now and perhaps more later D = use an untested spraying alternative -Refer to Scenario 22-2.Consider the public policy for dealing with the diseased trees.Using a Borda count with 4 points assigned to the first choice,3 points assigned to the second choice,2 points assigned to the third choice,and 1 point assigned to the fourth choice,which policy wins?


A) A
B) B
C) C
D) D

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

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Table 22-4 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. Table 22-4 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-4.Which pairwise voting scheme would result in outcome B? A) First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D. B) First, choose between B and C. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and D. C) First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A. D) First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B. -Refer to Table 22-4.Which pairwise voting scheme would result in outcome B?


A) First, choose between A and B. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and D.
B) First, choose between B and C. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and D.
C) First, choose between B and D. Second, voters choose between the winner of the first vote and C. Third, voters choose between the winner of the second vote and A.
D) First, choose between C and D. Second, voters choose between the winner of the first vote and A. Third, voters choose between the winner of the second vote and B.

E) None of the above
F) B) and C)

Correct Answer

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Table 22-11 The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences. Table 22-11 The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences. -Refer to Table 22-11.Suppose before any voting takes place that alternative W is eliminated as an option.Based on this information,the median voter's first choice is A) X B) Y C) Z D) The median voter's first choice cannot be determined from the information given. -Refer to Table 22-11.Suppose before any voting takes place that alternative W is eliminated as an option.Based on this information,the median voter's first choice is


A) X
B) Y
C) Z
D) The median voter's first choice cannot be determined from the information given.

E) C) and D)
F) None of the above

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When each voter has a most-preferred outcome for the expenditure on a particular government program,majority rule will produce the outcome


A) preferred by the mean (average) voter.
B) preferred by the median voter.
C) that causes the political party in power to increase its power.
D) defined by Arrow's Impossibility Theorem.

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

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The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

A) True
B) False

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A person's tendency to smoke a cigarette after promising himself that he will quit is an example of the behavioral economics insight that people are inconsistent over time

A) True
B) False

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Informational asymmetry may apply to a hidden action or hidden characteristic where the informed party may be reluctant to reveal relevant information.

A) True
B) False

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Which of the following is not a common response to the moral hazard problem that employers face?


A) providing an on-site workout facility
B) paying efficiency wages
C) requiring employees to provide itemized receipts for reimbursable expenses
D) paying year-end bonuses rather than higher monthly earnings

E) B) and D)
F) All of the above

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Table 22-10 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. Table 22-10 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 22-10.Suppose the three decide to make the decision based on pairwise majority voting.If they first choose between Action and Horror and then choose between the winner of the first vote and Comedy,which movie alternative will win? A) Action B) Comedy C) Horror D) There is no clear winner - Action and Horror will tie. -Refer to Table 22-10.Suppose the three decide to make the decision based on pairwise majority voting.If they first choose between Action and Horror and then choose between the winner of the first vote and Comedy,which movie alternative will win?


A) Action
B) Comedy
C) Horror
D) There is no clear winner - Action and Horror will tie.

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

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Arrow's impossibility theorem shows that it is impossible to find a better voting system than pairwise majority voting.

A) True
B) False

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Which of the following is an example of screening?


A) a man buys an expensive birthday present for his girlfriend
B) an insurance company offers a policy with a high deductible
C) the seller of a used motorcycle knows more about its true condition than a prospective buyer
D) society supports long prison terms for corporate criminals

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

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Asymmetric information


A) is not an area of current research in economics.
B) can take the form of a hidden action or a hidden characteristic.
C) explains Arrow's impossibility theorem.
D) is uncommon in corporate management.

E) A) and D)
F) None of the above

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The ultimatum game reveals that


A) it does not make sense to try to maximize profits.
B) people may have an innate sense of fairness that economic theory does not capture.
C) offering someone a wildly unfair outcome is usually ok since people tend to make decisions using a "something is better than nothing" philosophy.
D) Both a and b

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

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The two major problems caused by asymmetric information are the moral-hazard problem and the principal-agent problem.

A) True
B) False

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Economists have found that asymmetric information is not very prevalent.

A) True
B) False

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Which of the following sets of preferences can not satisfy the property of transitivity?


A) Plan A is preferred to plan D. Plan D is preferred to plan B. Plan C is preferred to plan B.
B) Plan A is preferred to plan B. Plan B is preferred to plan C. Plan A is preferred to plan C.
C) Plan C is preferred to plan A. Plan B is preferred to plan A. Plan C is preferred to plan B.
D) Plan D is preferred to plan C. Plan C is preferred to plan B. Plan B is preferred to plan D.

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

Correct Answer

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Adverse selection is


A) the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior.
B) an action taken by an uninformed party to induce an informed party to reveal information.
C) the failure of majority voting to produce transitive preferences for society.
D) the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.

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

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The field of political economy applies the methods of


A) psychology to study how the economy works.
B) political science to study how the economy works
C) economics to study how government works.
D) psychology to study how government works.

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

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Under majority rule,the order in which items are voted on is


A) unimportant, and this is a lesson of the Condorcet paradox.
B) unimportant, and this is a lesson of Arrow's impossibility theorem.
C) important, and this is a lesson of the Condorcet paradox.
D) important, and this is a lesson of Arrow's impossibility theorem.

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

Correct Answer

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