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Exam 22: Frontiers of Microeconomics

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Question 1

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What is the name of the mathematical result showing that no voting system can simultaneously satisfy the properties of unanimity,transitivity,independence of irrelevant alternatives,and no dictators?

A) The fundamental theorem of behavioral economics
B) Arrow's impossibility theorem
C) The fundamental theorem of voting
D) The median voter theorem

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

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B

Question 2

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Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

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Drivers (buyers and potential buyers of ...

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Question 3

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A street vendor sells a replica of a designer handbag to a young woman who believes the handbag is authentic.The street vendor is engaging in

Table 22-12 The following table shows the number of voters preferring various amounts of spending on a new school. -Refer to Table 22-12.Suppose on election day that the voters with a preference for $0.0,$2.0,$2.5,and $3.0 do not show up to vote.In this case,what is the preferred spending amount of the median voter (among those who actually cast a vote) ?

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.Mr.Johnson recommends using a vote by majority rule and proposes first choosing between Opryland and the Grand Canyon,then choosing between the winner of the first vote and Sea World,and finally choosing between the winner of the second vote and Disneyland.If everyone votes according to their preferences,

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.If the vote were conducted according to a modified Borda count system where each person's first choice receives 10 points,second choice 5 points,third choice 3 points and fourth choice 1 point,the result would be that

Table 22-1 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. -Refer to Table 22-1.If the town administrator first asks the citizens to vote for hockey or basketball and then asks them to choose between the winner of the first vote and football,what will be the outcome?

An insurance company that writes automobile policies tries to separate safe drivers from risky drivers by offering policies that feature different deductibles and different premiums.This practice is best described as an example of

An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

Which of the following is not an example of signaling?

Scenario 22-4 Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection.The three choices are: a stoplight,a 4-way stop,and a 2-way stop.The voters are divided into three groups based on their preferences. Voter Type -Refer to Scenario 22-4.If the first vote pits a stoplight against a 4-way stop and the second vote pits a 2-way stop against the winner of the first vote,then the outcome is as follows:

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.Given pairwise voting in which voters choose first between A and B,then between the winner of the first vote and C,and finally between the winner of the second vote and D,which outcome would win?

Valerie prefers A to B and she prefers B to C.If Valerie's preferences are transitive,then she prefers A to C.

The criminal actions of the top managers of corporations such as Enron,Tyco,WorldCom,and Adelphia are an example of moral hazard.

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

Based on the studies of human decision making,which of the following statements is correct?

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.In a majority vote between alternatives X and Y,what percentage of the votes would X receive?

In a moral hazard problem,the agent is unable to perfectly monitor the principal's behavior so the principal applies less effort than the agent considers desirable.

Conventional economic theory assumes that people

Which of the following is an example of satisficing behavior?