Question 1

Which of the following is a reason to think that government action may not be valuable to improve market outcomes with asymmetric information?

Accepted Answer

A)   The private market can sometimes deal with information asymmetries using signaling and screening.
B)   The government rarely has more information than the private parties.
C)   Government actions have their own imperfections.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 2

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

Accepted Answer

A)   The firm cares less about profit and more about cost when there are many competitors in the market.
B)   The firm offers an employee­incentive program in which employees share in the firm's profits.
C)   The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm.
D)   The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.E) A) and C)
F) A) and B)

Question 3

Table 22-6 
-Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. Which of the following statements is true?

Accepted Answer

A)   In pairwise majority voting, B is preferred to A, A is preferred to C, and B is preferred to C.
B)   In pairwise majority voting, C is preferred to B, B is preferred to A, and C is preferred to A.
C)   In pairwise majority voting, B is preferred to A, A is preferred to C, and C is preferred to B.
D)   In pairwise majority voting, A is preferred to C, C is preferred to B, and A is preferred to B.E) All of the above
F) A) and C)

Question 4

Which of the following is not an example of an adverse selection problem?

Accepted Answer

A)   A homeowner purchases a refrigerator that the seller knows has a history of leaking.
B)   A highly productive worker quits her job after a salary cut knowing that she can make more at a different job.
C)   A major league baseball player performs poorly in his second season after signing a multi-million dollar contract.
D)   A contractor uses low quality materials for construction but charges for higher quality materials.E) A) and B)
F) None of the above

Question 5

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

Accepted Answer

A)   The employer pays his workers wages that are unusually high for the industry and region.
B)   The employer pays his employees year-end bonuses depending to how well the business does and his observations of the employees' efforts.
C)   The employer has voluntarily removed video cameras from the factory floor.
D)   Both A and B are correct.E) A) and B)
F) B) and D)

Question 6

The mathematical result showing that a majority rule voting system will produce the outcome most preferred by the voter exactly in the middle of the distribution is called the

Accepted Answer

median vot...

Question 7

Which of the following statements captures the meaning of transitivity of preferences?

Accepted Answer

A)   If A is preferred to B, then B is less preferred than A.
B)   If A is preferred to B, and B is preferred to C, then A is preferred to C.
C)   If A is preferred to B and B is preferred to C, then the preference for A over B is stronger than the preference for B over C.
D)   If A is preferred to C, then there exists B such that A is preferred to B and C is preferred to A.E) B) and C)
F) A) and B)

Question 8

Table 22-19
The 600 voters of Appleton are deciding by majority rule how much to spend on a new library. 
-Refer to Table 22-19. If an election were held between spending $2 million and $3 million, the median voter would vote for

Accepted Answer

A)   $3 million and $3 million would win.
B)   $3 million and $2 million would win.
C)   $2 million and $3 million would win.
D)   $2 million and $2 million would win.E) A) and C)
F) None of the above

Question 9

Pete owns a small store. He has noticed that when he is not at the store monitoring his employees, his revenue goes down. What are two changes Pete could make to wages he pays his employees to correct this problem?

Accepted Answer

delay payment/tie pa...

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Evidence from experiments in which real people play the ultimatum game supports the idea that people

Accepted Answer

A)   are rational wealth-maximizers.
B)   tend to be driven by fairness, without regard for their own self-interest.
C)   are driven by both fairness and self-interest.
D)   have trouble calculating their own levels of wealth.E) A) and D)
F) All of the above

Question 12

Moral hazard and adverse selection are similar asymmetric information problems but moral hazard involves hidden actions while adverse selection involves hidden characteristics.

Accepted Answer

A) True 
 B)False

Question 13

Ihaveathousandfriends Social Networking firm had a remarkably profitable year. As a result, its employees expect to receive bonus checks. Which of the following insights into human behavior do the employees exhibit?

Accepted Answer

A)   People are overconfident.
B)   People care about fairness.
C)   People are reluctant to change their minds.
D)   People are inconsistent over time.E) None of the above
F) A) and D)

Question 14

Maria and Jose installed a "nanny­camera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?

Accepted Answer

The answer of Maria and Jose installed a "nanny­camera" in...

Question 15

Table 22-10
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.
Voter Type 
-Refer to Table 22-10. If the town administrator asks voters to choose first between increasing taxes and turning off half of the streetlights, and then between the winner of the first vote and reducing police patrols, and then between the winner of the second vote and cutting the school arts budget, which choice will win the final vote?

Accepted Answer

A)   arts
B)   police
C)   streetlights
D)   taxesE) C) and D)
F) All of the above

Question 16

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 17

The majority of Americans, when asked how many states they could name, think they could name all fifty. However, when they are asked to do so, very few are able to come up with all fifty. This is an example of which systematic mistake that people make?

Accepted Answer

People are...

Question 18

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.
Voter Type 
-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 19

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) None of the above
F) A) and C)

Question 20

Table 22-1
Three friends -- Linda, Stephanie, and Jamie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: France, Greece, or Italy. They also agree that they will have two pairwise votes to determine where to go on vacation, with the majority determining the outcome on each vote. The first, second, and third choices for each person are as indicated in the table below. 
-Refer to Table 22-1. If the first vote pits France against Greece and the second vote pits Italy against the winner of the first vote, then the outcome is as follows:

Accepted Answer

A)   France wins the first vote and Italy wins the second vote, so they go to Italy.
B)   France wins the first vote and France wins the second vote, so they go to France.
C)   Greece wins the first vote and Greece wins the second vote, so they go to Greece.
D)   Greece wins the first vote and Italy wins the second vote, so they go to Italy.E) C) and D)
F) A) and B)

Exam 22: Frontiers of Microeconomics

Maria and Jose installed a "nannycamera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?

Correct Answer
verified

Ihaveathousandfriends Social Networking firm had a remarkably profitable year. As a result, its employees expect to receive bonus checks. Which of the following insights into human behavior do the employees exhibit?

Correct Answer
verified

The mathematical result showing that a majority rule voting system will produce the outcome most preferred by the voter exactly in the middle of the distribution is called the

Correct Answer
verified
median vot...
View Answer

Which of the following statements captures the meaning of transitivity of preferences?

Correct Answer
verified

Which of the following is a reason to think that government action may not be valuable to improve market outcomes with asymmetric information?

Correct Answer
verified

Correct Answer
verified

Moral hazard and adverse selection are similar asymmetric information problems but moral hazard involves hidden actions while adverse selection involves hidden characteristics.

Correct Answer
verified

Table 22-6 -Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. Which of the following statements is true?

Correct Answer
verified

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

Correct Answer
verified

Pete owns a small store. He has noticed that when he is not at the store monitoring his employees, his revenue goes down. What are two changes Pete could make to wages he pays his employees to correct this problem?

Correct Answer
verified
delay payment/tie pa...
View Answer

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

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

Evidence from experiments in which real people play the ultimatum game supports the idea that people

Correct Answer
verified

The majority of Americans, when asked how many states they could name, think they could name all fifty. However, when they are asked to do so, very few are able to come up with all fifty. This is an example of which systematic mistake that people make?

Correct Answer
verified
People are...
View Answer

Correct Answer
verified

Correct Answer
verified

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

Correct Answer
verified

Table 22-19 The 600 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-19. If an election were held between spending $2 million and $3 million, the median voter would vote for

Correct Answer
verified

Which of the following is not an example of an adverse selection problem?

Correct Answer
verified

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

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

Maria and Jose installed a "nanny­camera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?

Correct AnswerverifiedShow Answer

Ihaveathousandfriends Social Networking firm had a remarkably profitable year. As a result, its employees expect to receive bonus checks. Which of the following insights into human behavior do the employees exhibit?

Correct AnswerverifiedShow Answer

The mathematical result showing that a majority rule voting system will produce the outcome most preferred by the voter exactly in the middle of the distribution is called the

Correct Answerverifiedmedian vot...View AnswerShow Answer

Which of the following statements captures the meaning of transitivity of preferences?

Correct AnswerverifiedShow Answer

Which of the following is a reason to think that government action may not be valuable to improve market outcomes with asymmetric information?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Moral hazard and adverse selection are similar asymmetric information problems but moral hazard involves hidden actions while adverse selection involves hidden characteristics.

Correct AnswerverifiedShow Answer

Table 22-6 -Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Pete owns a small store. He has noticed that when he is not at the store monitoring his employees, his revenue goes down. What are two changes Pete could make to wages he pays his employees to correct this problem?

Correct Answerverifieddelay payment/tie pa...View AnswerShow Answer

Which of the following offers an explanation as to why the principal-agent problem exists for a firm?

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

Evidence from experiments in which real people play the ultimatum game supports the idea that people

Correct AnswerverifiedShow Answer

The majority of Americans, when asked how many states they could name, think they could name all fifty. However, when they are asked to do so, very few are able to come up with all fifty. This is an example of which systematic mistake that people make?

Correct AnswerverifiedPeople are...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following practices would indicate that an employer is trying to overcome a moral-hazard problem with his employees?

Correct AnswerverifiedShow Answer

Table 22-19 The 600 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-19. If an election were held between spending $2 million and $3 million, the median voter would vote for

Correct AnswerverifiedShow Answer

Which of the following is not an example of an adverse selection problem?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Maria and Jose installed a "nannycamera" in their home so that they can view how the nanny is interacting with their children while they are at work. What type of problem are they trying to combat?

Correct Answer
verified

Correct Answer
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Correct Answer
verified
median vot...
View Answer

Correct Answer
verified

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
verified

Correct Answer
verified
delay payment/tie pa...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
People are...
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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