Question 1

In economics,a difference in access to relevant knowledge is called a behavioral asymmetry.

Accepted Answer

A) True 
 B)False

Question 2

Table 22-9
 
-Refer to Table 22-9.The table shows the preferences of 100 voters over three possible outcomes: A,B,and C.In pairwise majority voting in which voters choose first between A and B and then choose between the winner of the first vote and C,

Accepted Answer

A)   outcome A will win the election.
B)   outcome B will win the election.
C)   outcome C will win the election.
D)   the outcome of the election cannot be determined with the given information.E) A) and B)
F) A) and C)

Question 3

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,and D.In addition,the table shows the percentage of voters of each type.If the election is an instant runoff,the winner will be

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and B)
F) All of the above

Question 4

Table 22-15
The town of Portsmouth is considering a renovation to the high school. The voters in Portsmouth have different preferences on the budget for the renovation as displayed below.
 
-Refer to Table 22-15.If there is a vote between a budget of $12 million and $16 million,the median voter will vote to spend

Accepted Answer

A)   $12 million and the voting outcome will be $12 million.
B)   $12 million and the voting outcome will be $16 million.
C)   $16 million and the voting outcome will be $12 million..
D)   $16 million and the voting outcome will be $16 million.E) A) and C)
F) A) and B)

Question 5

The Condorcet paradox

Accepted Answer

A)   demonstrates that the order in which one votes on options may influence the outcome.
B)   demonstrates that majority voting by itself may not reveal the outcome that society wants.
C)   disproves Arrow's impossibility theorem.
D)   Both a and b are correct.E) None of the above
F) B) and C)

Question 6

The Condorcet paradox shows that there is no scheme for aggregating individual preferences into a valid set of social preferences.

Accepted Answer

A) True 
 B)False

Question 7

When asymmetric information affects a relationship between two parties,it is always the case that

Accepted Answer

A)   neither party is well informed.
B)   one party is better informed than the other party.
C)   both parties are equally well informed.
D)   the government is better informed than either of the two parties.E) A) and B)
F) A) and C)

Question 8

Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth.

Accepted Answer

A) True 
 B)False

Question 9

A driver knows more than his auto insurer about how cautiously he drives.This is an example of

Accepted Answer

A)   a hidden action.
B)   a hidden characteristic.
C)   adverse selection.
D)   the Condorcet Paradox.E) A) and B)
F) A) and C)

Question 10

Insurance companies charge annual premiums to collect revenue,which they then use to pay customers who file claims for damages they incur.Because of the moral hazard problem insurance companies separate customers into groups.Group 1: customers who file few claims & Group 2: customers that file a lot of claims.After creating these groups,what happens to the average annual premium within a group?

Accepted Answer

A)   Group 1: average annual premium increasesGroup 2: average annual premium increases
B)   Group 1: average annual premium decreasesGroup 2: average annual premium increases
C)   Group 1: average annual premium increasesGroup 2: average annual premium decreases
D)   Group 1: average annual premium decreasesGroup 2: average annual premium decreasesE) B) and D)
F) None of the above

Question 11

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

Question 12

Evidence points to the fact that,in the real world,people appear to care about fairness

Accepted Answer

A)   only when it coincides with their own self-interest.
B)   only when it coincides with their determination to be consistent over time.
C)   even when it does not coincide with their own self-interest.
D)   not at all.E) B) and C)
F) C) and D)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Scenario 22-3
Three candidates, Frank, Brian, and Wanda, are running for office. There are three voters in the upcoming election: Henry, Diane, and Linda. Henry prefers Brian over Frank and Frank over Wanda. Diane prefers Wanda over Brian and Brian over Frank. Linda prefers Frank over Brian and Brian over Wanda.
-Refer to Scenario 22-3.If the voters were given a choice of Frank versus Brian first,then the winner was in a second election versus Wanda,who would win?

Accepted Answer

A)   Frank
B)   Brian
C)   Wanda
D)   There is not enough information to answer this question.E) None of the above
F) A) and B)

Question 15

Moral hazard occurs when

Accepted Answer

A)   an employer closely monitors an employee.
B)   two people consider a trade with each other and one person has relevant information about some aspect of the product's quality that the other person lacks.
C)   an employee lacks an incentive to promote the best interests of the employer, and the employer cannot observe the actions of the employee.
D)   an employee closely monitors the actions of her employer.E) B) and C)
F) A) and C)

Question 16

Which of the following is not an example of moral hazard?

Accepted Answer

A)   a person with car insurance drives recklessly
B)   a pet-sitter being paid to walk a dog for one hour per day only walks the dog for 20 minutes per day
C)   a thief steals a car
D)   All of the above are examples of moral hazard.E) A) and B)
F) C) and D)

Question 17

Your city newspaper publishes a "Best of" poll that lists its readers' favorite restaurants.Mundo Bar and Grill is ranked as the best casual restaurant.Your best friend had dinner at Mundo Bar and Grill last week and commented that the food was mediocre and the service was slow.You decide not to have dinner at Mundo Bar and Grill based on your friend's experience.Your decision illustrates that people

Accepted Answer

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

Question 18

When a jeweler sells a low quality diamond to a young man who believes the diamond is the highest quality,she is engaging in

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

Question 19

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 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?

Accepted Answer

A)   W
B)   X
C)   Y
D)   ZE) A) and D)
F) B) and C)

Question 20

Signaling is an action taken by an uninformed party to induce an informed party to reveal information.

Accepted Answer

A) True 
 B)False

Exam 22: Frontiers in Microeconomics.

Table 22-9 -Refer to Table 22-9.The table shows the preferences of 100 voters over three possible outcomes: A,B,and C.In pairwise majority voting in which voters choose first between A and B and then choose between the winner of the first vote and C,

Correct Answer
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The Condorcet paradox shows that there is no scheme for aggregating individual preferences into a valid set of social preferences.

Correct Answer
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Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth.

Correct Answer
verified

In economics,a difference in access to relevant knowledge is called a behavioral asymmetry.

Correct Answer
verified

When asymmetric information affects a relationship between two parties,it is always the case that

Correct Answer
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Moral hazard occurs when

Correct Answer
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The Condorcet paradox

Correct Answer
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Which of the following is not an example of moral hazard?

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

Correct Answer
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One implication of the Condorcet paradox is

Correct Answer
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A driver knows more than his auto insurer about how cautiously he drives.This is an example of

Correct Answer
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Correct Answer
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Signaling is an action taken by an uninformed party to induce an informed party to reveal information.

Correct Answer
verified

When a jeweler sells a low quality diamond to a young man who believes the diamond is the highest quality,she is engaging in

Correct Answer
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Correct Answer
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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,and D.In addition,the table shows the percentage of voters of each type.If the election is an instant runoff,the winner will be

Correct Answer
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Correct Answer
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Evidence points to the fact that,in the real world,people appear to care about fairness

Correct Answer
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Exam 22: Frontiers in Microeconomics.

Table 22-9 -Refer to Table 22-9.The table shows the preferences of 100 voters over three possible outcomes: A,B,and C.In pairwise majority voting in which voters choose first between A and B and then choose between the winner of the first vote and C,

Correct AnswerverifiedShow Answer

The Condorcet paradox shows that there is no scheme for aggregating individual preferences into a valid set of social preferences.

Correct AnswerverifiedShow Answer

Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth.

Correct AnswerverifiedShow Answer

In economics,a difference in access to relevant knowledge is called a behavioral asymmetry.

Correct AnswerverifiedShow Answer

When asymmetric information affects a relationship between two parties,it is always the case that

Correct AnswerverifiedShow Answer

Moral hazard occurs when

Correct AnswerverifiedShow Answer

The Condorcet paradox

Correct AnswerverifiedShow Answer

Which of the following is not an example of moral hazard?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One implication of the Condorcet paradox is

Correct AnswerverifiedShow Answer

A driver knows more than his auto insurer about how cautiously he drives.This is an example of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Signaling is an action taken by an uninformed party to induce an informed party to reveal information.

Correct AnswerverifiedShow Answer

When a jeweler sells a low quality diamond to a young man who believes the diamond is the highest quality,she is engaging in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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,and D.In addition,the table shows the percentage of voters of each type.If the election is an instant runoff,the winner will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Evidence points to the fact that,in the real world,people appear to care about fairness

Correct AnswerverifiedShow Answer

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