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Exam 22: Frontiers of Microeconomics

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Question 161

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The failure of majority rule to produce transitive preferences for society is called the

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Question 162

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Which of the following is not correct?

A) An example of adverse selection is man who tries to sell his used car without disclosing that it needs a new transmission.
B) The "invisible hand" of a free market will always fix the problems of adverse selection and moral hazard.
C) An employer may try to prevent a moral hazard problem by paying her workers an efficiency wage.
D) One interpretation of gift giving is that it reflects asymmetric information and signaling.

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

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Question 163

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When the buyer knows less than the seller about the characteristics of the good being sold, there is

Scenario 22-2 A wireless telephone service provider offers three service plans to its consumers. -Refer to Scenario 22-2. By offering consumers these choices, the wireless telephone provider is

Which of the following is not an example of a principal-agent relationship?

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

A person who makes decisions that are "merely good enough" is called a(n)

Normally, we expect voters' preferences to exhibit a property called

Table 22-8 The citizens of Mayville are having a severe budget shortage and are faced with eliminating athletics from the town high school. The town administrator has determined that the town can afford to maintain one sport. Exactly one of the three 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 22-8. If a Borda count is used, what will be the outcome of the voting?

An example of an information asymmetry is when a worker knows more than his employer about his work effort.

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. If there is a vote between a budget of $16 million and $20 million and voter vote for the budget nearest their preferred budget, then the median voter will vote to spend

The Latin term caveat emptor, meaning "let the buyer beware," brings to mind the problem of

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

Arrow's impossibility theorem demonstrates the impossibility of the median voter theorem.

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 name for the problem Katie creates by lying about the quality of the jeans?

A survey of 1,500 frequent restaurant patrons revealed that, Chang Cheng, a local Chinese restaurant, offers high- quality food at low prices. Based on one dining experience, a restaurant critic gave Chang Cheng a poor review, saying the food was not very good. As a result, you decide not to dine at Chang Cheng. This decision is an example of which of the following systematic mistakes that people make when making decisions?

Table 22-18 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 22-18. Suppose voters first choose in a majority vote between W and X. Second, voters choose in a majority vote between the winner of the first vote and Y. Third, voters choose in a majority vote between the winner of the second vote and Z. Which alternative will win?

Peter was recently hired as a salesman for a national consulting firm. His job involves spending a significant portion of his time out of the office visiting prospects and attending conferences. Which of the following is a strategy the consulting firm may employ to discourage Peter from shirking his responsibilities?

When Republicans and Democrats offer similar platforms in an election campaign, a likely explanation is the

Table 22-5 The citizens of Anytown will decide whether to build a new library, a recreation center, or an arena. Exactly one of the three 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 22-5. Which of the following statements is correct?