Question 1

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 has voluntarily removed video cameras from the factory floor.
C)   The employer has discontinued the practice of giving his employees' year-end bonuses.
D)   Both A and B are correct.E) A) and C)
F) A) and B)

Question 2

Which of the following relationships involves asymmetric information?

Accepted Answer

A)   Patients can look up information regarding certain prescription drugs giving them the same information as their doctors.
B)   Consumer Reports allows customers of DVD players to know as much about the quality of various players as the store salesperson.
C)   Car Fax allows car buyers to obtain used-vehicle histories providing them with the same information as the dealership salesperson.
D)   The batter in a baseball game must guess whether the pitcher is going to throw a fastball,curveball,or change-up.E) B) and D)
F) B) and C)

Question 3

In American politics,we often observe that during a campaign,the Democratic and Republican positions on many issues are similar,which illustrates

Accepted Answer

A)   Arrow's impossibility theorem.
B)   the Condorcet paradox.
C)   a Borda count.
D)   the median voter theorem.E) C) and D)
F) B) and C)

Question 4

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

Accepted Answer

A)   screening.
B)   behavioral economics.
C)   the Condorcet Paradox.
D)   signaling.E) A) and B)
F) B) and D)

Question 5

Scenario 22-1
At issue in a particular city vote is how much to spend,per person,on road repair next year.Among the 10,000 voters,1,500 prefer to spend $300 per person,but no more;2,800 prefer to spend $450 per person,but no more;3,500 prefer to spend $800 per person,but no more;and 2,200 prefer to spend $1500 per person,but no more.
-Refer to Scenario 22-1.If there is a vote on whether to spend $800 per person or $1100 per person,the median voter will vote to spend

Accepted Answer

A)   $800 per person and the voting outcome will be $800 per person.
B)   $800 per person and the voting outcome will be $1100 per person.
C)   $1100 per person and the voting outcome will be $800 per person.
D)   $1100 per person and the voting outcome will be $1100 per person.E) C) and D)
F) None of the above

Question 6

The median voter

Accepted Answer

A)   is the voter exactly in the middle of the distribution.
B)   is the voter whose preferred outcome beats any other proposal in a two-way race.
C)   always has more than half the votes on his side in a two-way race.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 7

A "satisficer" is a person who

Accepted Answer

A)   always chooses the best course of action.
B)   often chooses the worst course of action.
C)   makes decisions that are merely good enough.
D)   studies both economics and psychology.E) None of the above
F) B) and C)

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) All of the above
F) A) and C)

Question 9

The median voter's preferred outcome is the same as the

Accepted Answer

A)   average preferred outcome.
B)   outcome preferred by the greatest number of voters.
C)   outcome produced by majority rule.
D)   outcome preferred by Arrow's "perfect" voter.E) B) and C)
F) All of the above

Question 10

A radio story reported a study on the makes and models of cars that were observed going through intersections in the Washington,D.C.area without stopping at the stop signs.According to the story,Volvos were heavily overrepresented;the fraction of cars running stop signs that were Volvos was much greater than the fraction of Volvos in the total population of cars in the D.C.area.This is initially surprising because Volvo has built a reputation as an especially safe car that appeals to sensible,safety-conscious drivers.How is this observation best explained?

Accepted Answer

A)   Volvo drivers are not willing to take risks that they would take in another,less safe car.Driving a Volvo leads to a propensity to run stop signs.
B)   Volvo drivers are not willing to take risks that they would take in another,less safe car.Driving a Volvo reduces the propensity to run stop signs.
C)   Volvo drivers are willing to take risks that they would not take in another,less safe car.Driving a Volvo reduces the propensity to run stop signs.
D)   Volvo drivers are willing to take risks that they would not take in another,less safe car.Driving a Volvo leads to a propensity to run stop signs.E) A) and D)
F) A) and B)

Question 11

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) A) and D)

Question 12

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

Accepted Answer

A)   A customer purchases four apples,two of which are inedible.
B)   A card shop puts its Halloween merchandise on sale on November 1st.
C)   A young worker is fired after she is late for work three times in one month.
D)   A man whose father had a heart attack wants to increase his life insurance coverage.E) C) and D)
F) B) and D)

Question 13

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

Question 14

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Accepted Answer

Asymmetric information is present when t...

Question 15

Majority rule will produce the outcome most preferred by the median voter.

Accepted Answer

A) True 
 B)False

Question 16

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $100 will propose that she get $99 and that the other player get $1.By the same reasoning,if the amount to be split is $200,the player proposing the split will propose that she gets

Accepted Answer

A)   $100 and that the other player gets $100.
B)   $198 and that the other player gets $2.
C)   $199 and that the other player gets $1.
D)   $200 and that the other player gets nothing.E) C) and D)
F) None of the above

Question 17

Severe adverse-selection problems may result in

Accepted Answer

A)   too few good used cars being offered for sale.
B)   wages that are too low relative to equilibrium levels.
C)   too many good drivers buying too much automobile insurance.
D)   people with average health buying too much health insurance.E) All of the above
F) C) and D)

Question 18

Steve is planning to sell his home.In preparation for the sale,he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem.This is an example of

Accepted Answer

A)   moral hazard.
B)   screening.
C)   adverse selection.
D)   the principal-agent problem.E) All of the above
F) B) and C)

Question 19

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

Accepted Answer

A)   Arrow impossibility theorem.
B)   Condorcet paradox.
C)   pairwise voting proposition.
D)   median voter theorem.E) A) and D)
F) None of the above

Question 20

The problem that arises when one person performs a task on behalf of another person is called the lemons problem.

Accepted Answer

A) True 
 B)False

Exam 22: Frontiers of Microeconomics

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

Correct Answer
verified

The median voter's preferred outcome is the same as the

Correct Answer
verified

In American politics,we often observe that during a campaign,the Democratic and Republican positions on many issues are similar,which illustrates

Correct Answer
verified

The median voter

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

Which of the following relationships involves asymmetric information?

Correct Answer
verified

Severe adverse-selection problems may result in

Correct Answer
verified

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $100 will propose that she get $99 and that the other player get $1.By the same reasoning,if the amount to be split is $200,the player proposing the split will propose that she gets

Correct Answer
verified

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

Correct Answer
verified

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

Correct Answer
verified

Majority rule will produce the outcome most preferred by the median voter.

Correct Answer
verified

A "satisficer" is a person who

Correct Answer
verified

Correct Answer
verified

The problem that arises when one person performs a task on behalf of another person is called the lemons problem.

Correct Answer
verified

Steve is planning to sell his home.In preparation for the sale,he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem.This is an example of

Correct Answer
verified

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Correct Answer
verified
Asymmetric information is present when t...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

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

Correct AnswerverifiedShow Answer

The median voter's preferred outcome is the same as the

Correct AnswerverifiedShow Answer

In American politics,we often observe that during a campaign,the Democratic and Republican positions on many issues are similar,which illustrates

Correct AnswerverifiedShow Answer

The median voter

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

Which of the following relationships involves asymmetric information?

Correct AnswerverifiedShow Answer

Severe adverse-selection problems may result in

Correct AnswerverifiedShow Answer

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $100 will propose that she get $99 and that the other player get $1.By the same reasoning,if the amount to be split is $200,the player proposing the split will propose that she gets

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Majority rule will produce the outcome most preferred by the median voter,as demonstrated by the

Correct AnswerverifiedShow Answer

Majority rule will produce the outcome most preferred by the median voter.

Correct AnswerverifiedShow Answer

A "satisficer" is a person who

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The problem that arises when one person performs a task on behalf of another person is called the lemons problem.

Correct AnswerverifiedShow Answer

Steve is planning to sell his home.In preparation for the sale,he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem.This is an example of

Correct AnswerverifiedShow Answer

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Correct AnswerverifiedAsymmetric information is present when t...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Asymmetric information is present when t...
View Answer

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Correct Answer
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Correct Answer
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