Question 1

Information asymmetry refers to

Accepted Answer

A)  the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior.
B)  the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.
C)  an action taken by an informed party to reveal private information to an uninformed party.
D)  a difference in access to relevant knowledge.E) A) and B)
F) All of the above

Question 2

Table 22-16
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 22-16. Suppose that before the family can arrive at their decision, Opryland announced that it will be closed for the season due to flooding. Mr. Johnson recommends using a vote by majority rule and proposes first choosing between the Grand Canyon and Sea World, and then choosing between the winner of the first vote and Disneyland. If everyone votes according to their preferences,

Accepted Answer

A)  the winner of the first vote will be Sea World, the winner of the second vote will be Disneyland.
B)  the winner of the first vote will be Sea World, the winner of the second vote will be Grand Canyon.
C)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Disneyland.
D)  the winner of the first vote will be Grand Canyon, the winner of the second vote will be Grand Canyon.E) All of the above
F) None of the above

Question 3

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 C)
F) B) and C)

Question 4

Which of the following is an example of signaling?

Accepted Answer

A)  Graduates of highly-respected universities highlight that fact on their resumes.
B)  Magazine advertisements include the phrase "as seen on TV."
C)  Advertisements for universities include the phrase "fully accredited."
D)  All of the above are correct.E) B) and D)
F) C) and D)

Question 5

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

Accepted Answer

A)  optimizer.
B)  rational person.
C)  satisficer.
D)  maxi-minimizer.E) C) and D)
F) None of the above

Question 6

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to

Accepted Answer

A)  efficiency-wage theories.
B)  equilibrium wage theories.
C)  screening theories.
D)  signaling theories.E) A) and B)
F) B) and D)

Question 7

Frank is given the choice between pizza and hotdogs and chooses pizza. Then, before serving him, his host tells Franks he could have a hamburger. Frank says he wants a hot dog. Which of the properties of Arrow's impossibility theorem does Frank violate?

Accepted Answer

Independen...

Question 8

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Accepted Answer

A)  physics.
B)  biology.
C)  psychology.
D)  anthropology.E) B) and C)
F) All of the above

Question 9

Recent developments in political economy

Accepted Answer

A)  render much of the traditional field of political science obsolete.
B)  render much of the traditional field of economics obsolete.
C)  illustrate the resolute nature of democracy.
D)  point to the fact that government is a less-than-perfect institution.E) A) and B)
F) C) and D)

Question 10

One implication of the Condorcet paradox is

Accepted Answer

A)  that the order in which things are voted on can affect the result.
B)  that the order in which things are voted on is irrelevant.
C)  that you do not want to be in charge of arranging which items are voted upon first.
D)  that when there are only two items being voted on the order matters.E) A) and B)
F) All of the above

Question 11

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. 
-Refer to Table 22-5. If the citizens of Anytown use a Borda count, rather than pairwise majority voting, to decide what to build, then they will build a new

Accepted Answer

A)  library.
B)  recreation center.
C)  arena.
D)  None of the above is correct; a Borda count fails to produce a winner in this instance.E) A) and B)
F) A) and C)

Question 12

State one reason why government intervention may not be a good solution to an asymmetric information problem.

Accepted Answer

Possible answers:
1. The private market ...

Question 13

Bill and Bev are playing the ultimatum game, starting with $50. A coin flip results in Bev being the one to propose a division of the $50. If Bev acts as economic theory assumes, she should propose that

Accepted Answer

A)  she gets $30 and Bill gets $20.
B)  she gets $25 and Bill gets $25.
C)  she gets $24 and Bill gets $26.
D)  she gets $49 and Bill gets $1.E) B) and D)
F) B) and C)

Question 14

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

Accepted Answer

A)  unanimity and transitivity only
B)  transitivity and independence of irrelevant alternatives only
C)  no dictators and transitivity only
D)  unanimity, transitivity, independence of irrelevant alternatives, and no dictatorsE) A) and B)
F) B) and D)

Question 15

Government action in cases of asymmetric information may not be an ideal solution because

Accepted Answer

A)  the private market can sometimes deal with information asymmetries on its own.
B)  the government tends to have more information than private parties.
C)  both (a)  and (b) .
D)  None of the above is correct.E) None of the above
F) A) and B)

Question 16

Table 22-11
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 22-11. 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 result would be

Accepted Answer

A)  that A would win.
B)  that B would win.
C)  that C would win.
D)  a tie between A and D.E) B) and C)
F) A) and D)

Question 17

If A is preferred to B and B is preferred to C, then we would expect A to be preferred to C. This property is called

Accepted Answer

The answer of If A is preferred to B and...

Question 18

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

Accepted Answer

The median voter theorem implies that po...

Question 19

On car insurance policies, Countrywide Insurance Company offers drivers an option: Policy 1 features a deductible of $1,000, and it requires a driver to pay an annual premium of $500. Policy 2 features a deductible of $250, and it requires a driver to pay an annual premium of $1,000.

Accepted Answer

A)  In offering these two policies, Countrywide is engaging in illegal price discrimination.
B)  In offering these two policies, Countrywide is screening drivers.
C)  Policy 1 is more of a burden for safe drivers than it is for risky drivers.
D)  In offering these two policies, Countrywide is signaling their quality to drivers.E) A) and D)
F) A) and C)

Question 20

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.

Accepted Answer

A)  This is a moral hazard problem since Matt may not work as hard as Kim would like when he is not monitored.
B)  Kim choosing to hire Matt is an example of adverse selection since it is possible that Matt will not work as hard as Kim expects.
C)  Kim will most likely pay Matt a lower salary than normal since Kim will not be there to monitor Matt's work effort, and since Matt will not likely work hard knowing Kim cannot monitor his effort.
D)  Kim is the agent and Matt is the principal.E) B) and C)
F) A) and D)

Exam 22: Frontiers in Microeconomics

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.

Correct Answer
verified

Bill and Bev are playing the ultimatum game, starting with $50. A coin flip results in Bev being the one to propose a division of the $50. If Bev acts as economic theory assumes, she should propose that

Correct Answer
verified

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

Correct Answer
verified
The median voter theorem implies that po...
View Answer

Government action in cases of asymmetric information may not be an ideal solution because

Correct Answer
verified

Frank is given the choice between pizza and hotdogs and chooses pizza. Then, before serving him, his host tells Franks he could have a hamburger. Frank says he wants a hot dog. Which of the properties of Arrow's impossibility theorem does Frank violate?

Correct Answer
verified
Independen...
View Answer

Recent developments in political economy

Correct Answer
verified

Correct Answer
verified

One implication of the Condorcet paradox is

Correct Answer
verified

State one reason why government intervention may not be a good solution to an asymmetric information problem.

Correct Answer
verified
Possible answers:
1. The private market ...
View Answer

On car insurance policies, Countrywide Insurance Company offers drivers an option: Policy 1 features a deductible of $1,000, and it requires a driver to pay an annual premium of $500. Policy 2 features a deductible of $250, and it requires a driver to pay an annual premium of $1,000.

Correct Answer
verified

If A is preferred to B and B is preferred to C, then we would expect A to be preferred to C. This property is called

Correct Answer
verified

Correct Answer
verified

The classic example of adverse selection is the

Correct Answer
verified

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

Correct Answer
verified

Which of the following is an example of signaling?

Correct Answer
verified

Correct Answer
verified

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to

Correct Answer
verified

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

Correct Answer
verified

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Correct Answer
verified

Information asymmetry refers to

Correct Answer
verified

Exam 22: Frontiers in Microeconomics

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.

Correct AnswerverifiedShow Answer

Bill and Bev are playing the ultimatum game, starting with $50. A coin flip results in Bev being the one to propose a division of the $50. If Bev acts as economic theory assumes, she should propose that

Correct AnswerverifiedShow Answer

Assume there are two major political parties: the Conservatives and the Liberals. What does the median voter theorem imply about the nature of the platforms (that is, policy stances) of the Conservatives and Liberals?

Correct AnswerverifiedThe median voter theorem implies that po...View AnswerShow Answer

Government action in cases of asymmetric information may not be an ideal solution because

Correct AnswerverifiedShow Answer

Frank is given the choice between pizza and hotdogs and chooses pizza. Then, before serving him, his host tells Franks he could have a hamburger. Frank says he wants a hot dog. Which of the properties of Arrow's impossibility theorem does Frank violate?

Correct AnswerverifiedIndependen...View AnswerShow Answer

Recent developments in political economy

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One implication of the Condorcet paradox is

Correct AnswerverifiedShow Answer

State one reason why government intervention may not be a good solution to an asymmetric information problem.

Correct AnswerverifiedPossible answers:1. The private market ...View AnswerShow Answer

On car insurance policies, Countrywide Insurance Company offers drivers an option: Policy 1 features a deductible of $1,000, and it requires a driver to pay an annual premium of $500. Policy 2 features a deductible of $250, and it requires a driver to pay an annual premium of $1,000.

Correct AnswerverifiedShow Answer

If A is preferred to B and B is preferred to C, then we would expect A to be preferred to C. This property is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The classic example of adverse selection is the

Correct AnswerverifiedShow Answer

Arrow's impossibility theorem shows that no voting system can satisfy which of the following properties?

Correct AnswerverifiedShow Answer

Which of the following is an example of signaling?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Employers may choose to pay their workers a wage that exceeds the equilibrium wage according to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The field of behavioral economics builds a more subtle and complex model of economic behavior using insights from

Correct AnswerverifiedShow Answer

Information asymmetry refers to

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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The median voter theorem implies that po...
View Answer

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Correct Answer
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Independen...
View Answer

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Correct Answer
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Correct Answer
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Possible answers:
1. The private market ...
View Answer

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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Correct Answer
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Correct Answer
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