Question 1

Brandon is considering buying a used car but he first downloads a report from the internet that shows the history of accidents and major repairs conducted on the car. This action is called

Accepted Answer

The answer of Brandon is considering buying a used car...

Question 2

Advocates of a tax on soda and other sugary drinks argue that such a tax

Accepted Answer

A)   may encourage better nutrition.
B)   will protect our future selves from the long run negative effects of consuming these drinks.
C)   is needed because people tend to behave inconsistently over time.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 3

One way that employers respond to the moral-hazard problem is by monitoring their employees.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an example of moral hazard?

Accepted Answer

A)   a driver is arrested for drunk driving
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 D)
F) B) and C)

Question 5

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

Question 6

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) A) and B)

Question 7

Table 22-13
A high school Spanish class and their teacher are planning to take a Spring Break trip abroad but they have to decide where to go. They have narrowed the options to: Spain, Mexico, Ecuador, and Costa Rica. The voters' preferences are shown in the table below. 
-Refer to Table 22-13. In a pairwise election between Mexico and Ecuador and then a second election between the winner and Costa Rica, which countries are chosen?

Accepted Answer

A)   Ecuador is chosen in the in the first and second elections.
B)   Ecuador is chosen in the first election and Costa Rica is chosen in the second.
C)   Mexico is chosen in the first and second elections.
D)   Mexico is chosen in the first election and Costa Rica is chosen in the second.E) A) and B)
F) B) and D)

Question 8

Experiments show that when real people play the ultimatum game, starting with $100,

Accepted Answer

A)   Player A usually proposes giving Player B more than $50.
B)   Player B usually accepts Player A's proposal if Player A proposes giving Player B $30 or $40.
C)   players show themselves to be rational wealth-maximizers.
D)   Both B and C are correct.E) A) and D)
F) C) and D)

Question 9

Table 22-6 
-Refer to Table 22-6. The table shows the preferences of 100 voters over three possible outcomes: A, B, and C. If a Borda count election were held among these voters, giving three points to each voter's first choice, two points to the second choice, and one point to the last choice, which outcome would win the election?

Accepted Answer

A)   Outcome A
B)   Outcome B
C)   Outcome C
D)   Either outcome A or outcome C since these have the same total score.E) B) and D)
F) A) and C)

Question 10

The adverse selection problem is a likely explanation for the fact that

Accepted Answer

A)   some parents use video cameras to monitor the nannies caring for their children.
B)   some corporate managers were recently sent to prison for enriching themselves at the expense of shareholders.
C)   people in average health may be discouraged from buying health insurance by the high price.
D)   gifts can be interpreted as signals.E) All of the above
F) None of the above

Question 11

Table 22-20
The table below shows the preferred city budget (in millions)  for in the city of Springfield. 
-Refer to Table 22-20. In an election, each voter will select the budget closest to his or her most preferred budget. Using this information, what is the most preferred budget of the median voter?

Accepted Answer

A)   $10
B)   $20
C)   $30
D)   $40E) B) and C)
F) A) and B)

Question 12

Sam needs to have his car serviced. There is an auto repair shop located nearby that does a lot of business and has an online rating of 4 out of 5 stars. Sam takes his car to be serviced and thinks the service person is grumpy and that his car is still not running as well as it could be. Sam then makes a point of telling his friends not to use the repair shop. Sam's actions illustrate which of the following systematic mistakes that people make when making decisions?

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) None of the above
F) B) and D)

Question 13

Table 22-22
The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. 
-Refer to Table 22-22. The median voter is one who prefers to spend

Accepted Answer

A)   $12 million.
B)   $16 million
C)   $20 million.
D)   None of the above are correct.E) A) and B)
F) A) and C)

Question 14

Which of the following is not correct?

Accepted Answer

A)   An example of adverse selection is man who tries to sell his used car without disclosing that it needs a new transmission.
B)   The "invisible hand" of a free market will always fix the problems of adverse selection and moral hazard.
C)   An employer may try to prevent a moral hazard problem by paying her workers an efficiency wage.
D)   One interpretation of gift giving is that it reflects asymmetric information and signaling.E) All of the above
F) B) and C)

Question 15

When markets fail, which of the following is true?

Accepted Answer

A)   Government intervention can always improve outcomes.
B)   Government intervention can potentially improve outcomes.
C)   Government intervention can never improve outcomes.
D)   Markets do not fail.E) A) and C)
F) B) and D)

Question 16

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This is an example of

Accepted Answer

A)   a moral hazard problem.
B)   adverse selection.
C)   behavioral economics.
D)   signaling.E) All of the above
F) None of the above

Question 17

Table 22-17
Voter Type 
-Refer to Table 22-17. The table shows the preferences of three types of voters over three possible outcomes: A, B, and C. In addition, the table shows the percentage of voters of each type. Based on this information, which of the following statements is true?

Accepted Answer

A)   As the Condorcet Paradox predicts, majority rule fails to produce transitive preferences for society.
B)   As Arrow's Impossibility Theorem demonstrates, it is impossible from this information to determine which outcome the voters prefer.
C)   The median voter theorem allows us to conclude that in a vote between B and C, B will win since the Type 2 voter is the median voter.
D)   While the Condorcet Paradox predicts that majority rule may not produce transitive preferences for society as a whole, society's preferences in this case are transitive.E) B) and D)
F) None of the above

Question 18

"Signaling" refers to actions by an informed party for the sole purpose of

Accepted Answer

A)   telling another party that the signaler has information to reveal, without actually revealing that information.
B)   conveying false information.
C)   induce employees to put in the effort they are capable of.
D)   credibly revealing private information.E) B) and C)
F) A) and D)

Question 19

Under majority rule, the order in which items are voted on is

Accepted Answer

A)   unimportant, and this is a lesson of the Condorcet paradox.
B)   unimportant, and this is a lesson of Arrow's impossibility theorem.
C)   important, and this is a lesson of the Condorcet paradox.
D)   important, and this is a lesson of Arrow's impossibility theorem.E) All of the above
F) B) and D)

Question 20

The problem of moral hazard is a problem of hidden action.

Accepted Answer

A) True 
 B)False

Exam 22: Frontiers of Microeconomics

Table 22-17 Voter Type -Refer to Table 22-17. The table shows the preferences of three types of voters over three possible outcomes: A, B, and C. In addition, the table shows the percentage of voters of each type. Based on this information, which of the following statements is true?

Correct Answer
verified

The adverse selection problem is a likely explanation for the fact that

Correct Answer
verified

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This is an example of

Correct Answer
verified

When markets fail, which of the following is true?

Correct Answer
verified

Which of the following is an example of moral hazard?

Correct Answer
verified

Brandon is considering buying a used car but he first downloads a report from the internet that shows the history of accidents and major repairs conducted on the car. This action is called

Correct Answer
verified

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. The median voter is one who prefers to spend

Correct Answer
verified

Under majority rule, the order in which items are voted on is

Correct Answer
verified

Correct Answer
verified

"Signaling" refers to actions by an informed party for the sole purpose of

Correct Answer
verified

Which of the following is an example of signaling?

Correct Answer
verified

Experiments show that when real people play the ultimatum game, starting with $100,

Correct Answer
verified

One way that employers respond to the moral-hazard problem is by monitoring their employees.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which of the following relationships involves asymmetric information?

Correct Answer
verified

The problem of moral hazard is a problem of hidden action.

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

Advocates of a tax on soda and other sugary drinks argue that such a tax

Correct Answer
verified

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

Table 22-17 Voter Type -Refer to Table 22-17. The table shows the preferences of three types of voters over three possible outcomes: A, B, and C. In addition, the table shows the percentage of voters of each type. Based on this information, which of the following statements is true?

Correct AnswerverifiedShow Answer

The adverse selection problem is a likely explanation for the fact that

Correct AnswerverifiedShow Answer

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This is an example of

Correct AnswerverifiedShow Answer

When markets fail, which of the following is true?

Correct AnswerverifiedShow Answer

Which of the following is an example of moral hazard?

Correct AnswerverifiedShow Answer

Brandon is considering buying a used car but he first downloads a report from the internet that shows the history of accidents and major repairs conducted on the car. This action is called

Correct AnswerverifiedShow Answer

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. The median voter is one who prefers to spend

Correct AnswerverifiedShow Answer

Under majority rule, the order in which items are voted on is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

"Signaling" refers to actions by an informed party for the sole purpose of

Correct AnswerverifiedShow Answer

Which of the following is an example of signaling?

Correct AnswerverifiedShow Answer

Experiments show that when real people play the ultimatum game, starting with $100,

Correct AnswerverifiedShow Answer

One way that employers respond to the moral-hazard problem is by monitoring their employees.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following relationships involves asymmetric information?

Correct AnswerverifiedShow Answer

The problem of moral hazard is a problem of hidden action.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Advocates of a tax on soda and other sugary drinks argue that such a tax

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified