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Exam 22: Frontiers of Microeconomics

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Question 61

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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 may be reducing sales. In this example, you are the

A) principal and the your employee is the agent.
B) agent and the your employee is the principal.
C) signaler and the your employee is the screener.
D) screener and the owner of the coffee ship is the signaler.

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

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Question 62

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Table 22-4 The fortunate residents of Anytown have a budget surplus. The mayor decided that it is only fair to have the residents vote on what to do with the surplus. The mayor has narrowed the options down to three possible projects: a playground, a library, or a swimming pool. The voters fall into three categories and have preferences as illustrated in the table. -Refer to Table 22-4. Which of the following statements is correct regarding the results of pairwise voting in Anytown?

A) The results of pairwise voting depend on the order of the pairs but satisfy the transitivity property.
B) The results of pairwise voting do not depend on the order of the pairs and satisfy the transitivity property.
C) The results of pairwise voting depend on the order of the pairs and do not satisfy the transitivity property.
D) The results of pairwise voting do not depend on the order of the pairs and do not satisfy the transitivity property.

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

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Question 63

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

Which of the following is not an example of asymmetric information?

Herbert Simon, one of the first social scientists to work at the boundary of economics and psychology, suggested that humans should be viewed not as rational maximers but as

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 reducing police patrols and increasing taxes, and then between the winner of the first vote and cutting the school arts budget, and then between the winner of the second vote and turning off half of the streetlights, which choice will win the final vote?

The Condorcet paradox implies that the order in which items are voted on under majority rule is unimportant.

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

Suppose you are covered under health insurance or belong to a Health Maintenance Organization (HMO) , and you are insured against all or most of the costs of visits to the doctor. As a result you are likely to make greater use of medical services of all kinds. This tendency of people with insurance to change their behavior in a way that leads to more claims against the insurance company is called

Which of the following would violate transitivity?

In view of the possible need for government action in markets where asymmetric information is a problem, which of the following is a valid concern?

Table 22-7 Suppose that residents of a town are asked to vote on the best way to improve the safety of an intersection. The three choices are: a stoplight, a 4-way stop, and a 2-way stop. The voters are divided into three groups based on their preferences. Voter Type -Refer to Table 22-7. If the first vote pits a 2-way stop against a stoplight and the second vote pits a 4-way stop against the winner of the first vote, then the outcome is as follows:

Bill would like to buy a gift for Ann to convey his love for her. Which of the following areas of economics would most likely study this type of decision?

Informational asymmetry is a difference in

Refer to Narrative 22-1. Which of the ladies is causing a moral hazard problem?

When homeowners sell a house, part of the paperwork they complete is a statement of disclosure on which the homeowners are supposed to reveal everything that they know is wrong with the house. The purpose of the statement of disclosure is to try to solve the

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?

What insight into human behavior do economist learn from observing people playing the ultimatum game?

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. Suppose on election day that the voters with a preference for less than $1.5 million do not show up to vote on a choice to spend either $2 million or $2.5 million. In this case, what is the preferred spending amount of the median voter (among those who actually cast a vote) ?

Table 22-14 Amy, Beth, and Connie are on a hiring committee. They have interviewed 3 candidates identified by their last names and are going to vote on which one is hired. -Refer to Table 22-14. Which results for pairwise voting are correct?