Question 1

In corporations, which of the following are principals but not agents?

Accepted Answer

A)  shareholders
B)  the board of directors
C)  managers
D)  workersE) B) and D)
F) A) and D)

Question 2

Economists have found that asymmetric information is not very prevalent.

Accepted Answer

A) True 
 B)False

Question 3

According to the median voter theorem, majority rule will

Accepted Answer

A)  always produce an inconclusive outcome.
B)  produce the outcome least preferred by the median voter.
C)  produce the outcome most preferred by the median voter.
D)  produce an outcome that is inconsistent with transitive preferences.E) C) and D)
F) A) and B)

Question 4

In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could

Accepted Answer

A)  better monitor the agent.
B)  pay the agent above-equilibrium wages.
C)  delay payment to the agent.
D)  stop paying bonuses.E) B) and C)
F) None of the above

Question 5

​Arrow's impossibility theorem proves that

Accepted Answer

A)  ​no voting system can satisfy several preferable properties at the same time.
B)  ​politicians will never be able to satisfy the median voter.
C)  ​politicians will never be able to act fully in the best interests of the public good.
D)  ​no voting system will ever depend on the median voter.E) B) and D)
F) None of the above

Question 6

Scenario 22-1
Esteban and Michaela own an apartment building. They hire Nico to manage the building and deal with tenants' complaints. They also hire Ted to make any necessary repairs to the apartments or the common area and they hire Rex to be the door guard at night.
-Refer to Scenario 22-1. Which of the following is an example of a moral hazard problem?

Accepted Answer

A)  Ted steals $5 off the counter in a tenant's apartment while he is there to repair a leaky faucet.
B)  Esteban and Michaela do not tell Nico that they are planning to sell the building at the end of the year.
C)  Esteban goes golfing while Michaela reviews the financials from the business.
D)  Rex is paid an efficiency wage to ensure productivity because he is usually not monitored while working.E) A) and D)
F) B) and D)

Question 7

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night, it is an example of

Accepted Answer

A)  both moral hazard and adverse selection.
B)  neither moral hazard nor adverse selection.
C)  moral hazard, but not adverse selection.
D)  adverse selection, but not moral hazard.E) None of the above
F) A) and B)

Question 8

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. Which pairwise voting scheme would result in outcome D?

Accepted Answer

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

Question 9

Some studies show that even students who earned high grades in science classes accept disproven explanations for scientific phenomena. These disproven explanations had been acquired prior to the science classes. These studies provide some support for which of the following systematic mistakes that people make?

Accepted Answer

A)  people are overconfident
B)  people give too much weight to a small number of vivid observations
C)  people are reluctant to change their minds
D)  All of the above are correct.E) B) and C)
F) C) and D)

Question 10

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

Accepted Answer

A)  adverse selection
B)  screening
C)  moral hazard
D)  signalingE) A) and C)
F) A) and B)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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. The town administrator would much rather have more tax revenue than have to cut any programs or services. If he wants to ensure that winning choice from voting is increasing taxes, how should he set up the voting?

Accepted Answer

A)  First vote: taxes vs. streetlights; Second vote: winner of the first vote vs. police; Third vote: winner of the second vote vs. arts
B)  First vote: arts vs. streetlights; Second vote: winner of the first vote vs. police; Third vote: winner of the second vote vs. taxes
C)  First vote: police vs. taxes; Second vote: winner of the first vote vs. arts; Third vote: winner of the second vote vs. streetlights
D)  The town administrator should use a Borda count.E) B) and C)
F) None of the above

Question 13

Which of the following is an example of an adverse selection problem?

Accepted Answer

A)  A customer purchases four apples, two of which are bruised.
B)  A card shop puts its Halloween merchandise on sale on November 1st.
C)  A young job applicant fails to reveal that she was fired from her last job because she was incompetent.
D)  A man rents a car and then drives it less carefully and fills it with cheaper gas than he would if he owned it.E) None of the above
F) All of the above C

Question 14

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 15

Table 22-23
The town of Franklin is facing a severe budget shortage. The town administrator has proposed four options to balance the budget: increase property taxes (taxes), cut the school arts budget (arts), turn off half of the streetlights in the town (streetlights), reduce police patrols (police). Exactly one of the four 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 22-23. If a Borda count is used, which option will win?

Accepted Answer

The answer of Table 22-23
The town of Franklin is facing...

Question 16

Employers can try to overcome the moral-hazard problem involving their employees by

Accepted Answer

A)  paying their employees more often.
B)  paying their employees below-equilibrium wages since the employees will likely shirk some of their responsibilities.
C)  better monitoring their employees' work efforts.
D)  requiring their employees to take a pre-employment work effort test.E) All of the above
F) B) and C)

Question 17

Which of the following sets of preferences satisfies the property of transitivity?

Accepted Answer

A)  Cookies are preferred to pie. Pie is preferred to brownies. Cookies are preferred to brownies.
B)  Cookies are preferred to pie. Brownies are preferred to pie. Pie is preferred to cookies.
C)  Cookies are preferred to ice cream. Ice cream is preferred to brownies. Brownies are preferred to cookies.
D)  Cookies are preferred to pie. Ice cream is preferred to cookies. Pie is preferred to ice cream.E) B) and C)
F) None of the above

Question 18

Table 22-21
The following table shows the number of voters preferring various amounts of spending to develop a river to make it more attractive for canoeing and kayaking. 
-Refer to Table 22-21. What is the preferred spending amount of the median voter?

Accepted Answer

A)  $1.0
B)  $1.5
C)  $2.0
D)  None of the above are correct.E) All of the above
F) A) and C) C

Question 19

The field of political economy

Accepted Answer

A)  casts aside most of the standard methods of economic analysis.
B)  is also referred to as the field of public choice.
C)  is also referred to as the field of macroeconomics.
D)  produces the conclusion that democratic principles rarely lead to desirable economic outcomes.E) C) and D)
F) None of the above

Question 20

Which of the following relationships involves asymmetric information?

Accepted Answer

A)  A potential employee knows more about his skills and motivations than potential employers.
B)  The seller of a used car knows of mechanical problems that aren't easy for the average buyer to observe.
C)  A real estate agent knows the lowest price a seller is willing to sell her house for, but does not reveal it to people he shows the house.
D)  All of the above are correct.E) A) and D)
F) A) and C)

Exam 22: Frontiers in Microeconomics

In corporations, which of the following are principals but not agents?

Correct Answer
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Economists have found that asymmetric information is not very prevalent.

Correct Answer
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According to the median voter theorem, majority rule will

Correct Answer
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In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could

Correct Answer
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Arrow's impossibility theorem proves that

Correct Answer
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Correct Answer
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When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night, it is an example of

Correct Answer
verified

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. Which pairwise voting scheme would result in outcome D?

Correct Answer
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A

Correct Answer
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Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

Correct Answer
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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.

Correct Answer
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Correct Answer
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Which of the following is an example of an adverse selection problem?

Correct Answer
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C

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

Correct Answer
verified

Correct Answer
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Employers can try to overcome the moral-hazard problem involving their employees by

Correct Answer
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Which of the following sets of preferences satisfies the property of transitivity?

Correct Answer
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Table 22-21 The following table shows the number of voters preferring various amounts of spending to develop a river to make it more attractive for canoeing and kayaking. -Refer to Table 22-21. What is the preferred spending amount of the median voter?

Correct Answer
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C

The field of political economy

Correct Answer
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Which of the following relationships involves asymmetric information?

Correct Answer
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Exam 22: Frontiers in Microeconomics

In corporations, which of the following are principals but not agents?

Correct AnswerverifiedShow Answer

Economists have found that asymmetric information is not very prevalent.

Correct AnswerverifiedShow Answer

According to the median voter theorem, majority rule will

Correct AnswerverifiedShow Answer

In the case of a moral-hazard problem, which of the following is not a way for the principal to encourage the agent to act more responsibly? The principal could

Correct AnswerverifiedShow Answer

​Arrow's impossibility theorem proves that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night, it is an example of

Correct AnswerverifiedShow Answer

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. Which pairwise voting scheme would result in outcome D?

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an example of an adverse selection problem?

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Employers can try to overcome the moral-hazard problem involving their employees by

Correct AnswerverifiedShow Answer

Which of the following sets of preferences satisfies the property of transitivity?

Correct AnswerverifiedShow Answer

Table 22-21 The following table shows the number of voters preferring various amounts of spending to develop a river to make it more attractive for canoeing and kayaking. -Refer to Table 22-21. What is the preferred spending amount of the median voter?

Correct AnswerverifiedC

The field of political economy

Correct AnswerverifiedShow Answer

Which of the following relationships involves asymmetric information?

Correct AnswerverifiedShow Answer

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Arrow's impossibility theorem proves that

Correct Answer
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A

Correct Answer
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C

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C

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