Question 1

Hernando travels a great deal,and over the past several years he has read several reviews of hotel chains,all of which rave about the clean rooms and great service at Portal Inn hotels.Last month,Hernando checked into a room at a Portal Inn for the first time,only to find the room filthy and the service lousy.He decided the Portal Inn chain is inferior to other hotel chains.How can Hernando be described

Accepted Answer

A)  Hernando was irrational to have believed the reviews that he had read.
B)  Hernando was rational to have changed his mind about Portal Inns based on his one experience.
C)  Hernando is an example of someone who gives too much weight to a small number of vivid observations.
D)  Hernando is an example of someone who behaves in the Homo economicus fashion.E) A) and B)
F) A) and C)

Question 2

The Condorcet voting paradox applies to situations in which voters do which of the following things

Accepted Answer

A)  They decide between exactly two possible similar outcomes.
B)  They decide among more than two possible outcomes.
C)  They decide to make a choice between two possible outcomes.
D)  They decide between exactly two very different outcomes.E) A) and D)
F) C) and D)

Question 3

Assume there are nine voters in a certain small town and let x = preferred number of dollars spent per person per month on garbage collection.For Voters 1,2,and 3,x = $10; for Voter 4,x = $15; for Voter 5,x = $18; and for Voters 6,7,8 and 9,x = $20.Who is a median voter

Accepted Answer

A)  Voter 3
B)  Voter 4
C)  Voter 5
D)  Voter 6E) A) and C)
F) C) and D)

Question 4

According to researchers,what systematic mistake do people make in their decision making

Accepted Answer

A)  being overconfident
B)  giving too little weight to a small number of vivid observations
C)  changing their minds too often
D)  being too rationalE) A) and D)
F) C) and D)

Question 5

Assume there are two major political parties: the Conservatives and the Liberals.What does the median voter theorem imply about the nature of the platforms (that is,policy stances) of the Conservatives and Liberals

Accepted Answer

The median voter theorem implies that po...

Question 6

Which phenomenon does the lemons problem likely explain

Accepted Answer

A)  For several months after it is purchased, the price of a new car falls very little.
B)  Almost no one favours government-provided health insurance.
C)  People in average health may be discouraged from buying health insurance due to the high price.
D)  Employers are reluctant to monitor the activities of their workers, fearing that some of the workers may take legal action against the employers.E) A) and D)
F) A) and B)

Question 7

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.What is this an example of

Accepted Answer

A)  screening
B)  signing
C)  underwriting
D)  signallingE) B) and D)
F) B) and C)

Question 8

One of the things that employers can do to lessen the moral hazard problem involving their employees is to pay them in advance for their work.

Accepted Answer

A) True 
 B)False

Question 9

How is a person who puts a significant portion of his income into a retirement plan such as an RRSP best characterized

Accepted Answer

A)  He is like a smoker who keeps telling himself that he will quit smoking, but never does.
B)  He is like a person who is trying to lose weight and who succeeds in forcing himself to quit eating dessert.
C)  He apparently prefers instant gratification to alternative uses of income.
D)  He may be continuing a habit of being inconsistent over time.E) A) and B)
F) A) and C)

Question 10

What does the Condorcet paradox show

Accepted Answer

A)  preferential voting based on majority rule are inefficient in all cases.
B)  problems in counting votes can negate legitimate democratic outcomes.
C)  the order in which items are voted on can affect the result.
D)  transitive preferences are inconsistent with rationality.E) None of the above
F) B) and D)

Question 11

Explain the Condorcet paradox.To which type of voting system does it apply?

Accepted Answer

The Condorcet paradox applies directly t...

Question 12

Which type of voting does the Condorcet paradox apply to

Accepted Answer

A)  pairwise majority voting
B)  a vote that requires unanimous consent by all voters
C)  preferential voting
D)  a Borda countE) None of the above
F) C) and D)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which outcome may well result from severe adverse-selection problems

Accepted Answer

A)  Too few good used cars are offered for sale.
B)  Wages are too low relative to equilibrium levels.
C)  Too many good drivers buy too much automobile insurance.
D)  Prices for inferior goods are too low.E) A) and B)
F) A) and C)

Question 16

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

Question 17

What problem does the Latin term caveat emptor,meaning "let the buyer beware," bring to mind

Accepted Answer

A)  the problem of hidden actions
B)  the problem of adverse selection
C)  the problem of principals and agents
D)  the problem of moral hazardE) A) and B)
F) All of the above

Question 18

What do we know about the Arrow impossibility theorem in the history of political economy

Accepted Answer

A)  It was proved by Arrow mathematically and definitively.
B)  It has not been taken seriously since the 1970s.
C)  It was overturned by the median voter theorem in the 1990s.
D)  It runs counter to most people's intuition in that it establishes the "relevance of irrelevant alternatives."E) C) and D)
F) A) and B)

Question 19

Table 22-2
Voters are deciding how they will spend the City of Elmongary's budget surplus.They have enough money to build one of three projects: build a school, build a skate park, or build a bike lane for commuters.They agree that they will have two pairwise votes to determine how to spend their budget, with the majority determining the outcome on each vote.The first, second, and third choices for each project are as indicated in the table below. 
-Refer to Table 22-2.If the citizens of Elmongary use a Borda count,rather than pairwise majority voting,to decide what to build,what will they build

Accepted Answer

A)  a new school
B)  a new skate park
C)  a new bike lane
D)  nothingE) None of the above
F) All of the above

Question 20

Lisa,a homeowner,buys fewer fire extinguishers than her insurance company would prefer.What can we infer from this behaviour

Accepted Answer

A)  There is an adverse-selection problem.
B)  There is a moral hazard problem.
C)  Lisa can be regarded as a principal; her insurance company can be regarded as an agent.
D)  Lisa must be regarded as irrational in that her benefits from buying fire extinguishers are just as great as the insurance company's benefits.E) All of the above
F) A) and B)

Exam 22: Frontiers of Microeconomics

What do we know about the Arrow impossibility theorem in the history of political economy

Correct Answer
verified

The Condorcet voting paradox applies to situations in which voters do which of the following things

Correct Answer
verified

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

Correct Answer
verified

What problem does the Latin term caveat emptor,meaning "let the buyer beware," bring to mind

Correct Answer
verified

Which type of voting does the Condorcet paradox apply to

Correct Answer
verified

According to researchers,what systematic mistake do people make in their decision making

Correct Answer
verified

Lisa,a homeowner,buys fewer fire extinguishers than her insurance company would prefer.What can we infer from this behaviour

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

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.What is this an example of

Correct Answer
verified

Which outcome may well result from severe adverse-selection problems

Correct Answer
verified

Which phenomenon does the lemons problem likely explain

Correct Answer
verified

Correct Answer
verified

One of the things that employers can do to lessen the moral hazard problem involving their employees is to pay them in advance for their work.

Correct Answer
verified

Assume there are two major political parties: the Conservatives and the Liberals.What does the median voter theorem imply about the nature of the platforms (that is,policy stances) of the Conservatives and Liberals

Correct Answer
verified
The median voter theorem implies that po...
View Answer

Explain the Condorcet paradox.To which type of voting system does it apply?

Correct Answer
verified
The Condorcet paradox applies directly t...
View Answer

Correct Answer
verified

How is a person who puts a significant portion of his income into a retirement plan such as an RRSP best characterized

Correct Answer
verified

What does the Condorcet paradox show

Correct Answer
verified

Assume there are nine voters in a certain small town and let x = preferred number of dollars spent per person per month on garbage collection.For Voters 1,2,and 3,x = $10; for Voter 4,x = $15; for Voter 5,x = $18; and for Voters 6,7,8 and 9,x = $20.Who is a median voter

Correct Answer
verified

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

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

What do we know about the Arrow impossibility theorem in the history of political economy

Correct AnswerverifiedShow Answer

The Condorcet voting paradox applies to situations in which voters do which of the following things

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What problem does the Latin term caveat emptor,meaning "let the buyer beware," bring to mind

Correct AnswerverifiedShow Answer

Which type of voting does the Condorcet paradox apply to

Correct AnswerverifiedShow Answer

According to researchers,what systematic mistake do people make in their decision making

Correct AnswerverifiedShow Answer

Lisa,a homeowner,buys fewer fire extinguishers than her insurance company would prefer.What can we infer from this behaviour

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

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.What is this an example of

Correct AnswerverifiedShow Answer

Which outcome may well result from severe adverse-selection problems

Correct AnswerverifiedShow Answer

Which phenomenon does the lemons problem likely explain

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One of the things that employers can do to lessen the moral hazard problem involving their employees is to pay them in advance for their work.

Correct AnswerverifiedShow Answer

Assume there are two major political parties: the Conservatives and the Liberals.What does the median voter theorem imply about the nature of the platforms (that is,policy stances) of the Conservatives and Liberals

Correct AnswerverifiedThe median voter theorem implies that po...View AnswerShow Answer

Explain the Condorcet paradox.To which type of voting system does it apply?

Correct AnswerverifiedThe Condorcet paradox applies directly t...View AnswerShow Answer

Correct AnswerverifiedShow Answer

How is a person who puts a significant portion of his income into a retirement plan such as an RRSP best characterized

Correct AnswerverifiedShow Answer

What does the Condorcet paradox show

Correct AnswerverifiedShow Answer

Assume there are nine voters in a certain small town and let x = preferred number of dollars spent per person per month on garbage collection.For Voters 1,2,and 3,x = $10; for Voter 4,x = $15; for Voter 5,x = $18; and for Voters 6,7,8 and 9,x = $20.Who is a median voter

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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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Correct Answer
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Correct Answer
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Correct Answer
verified
The median voter theorem implies that po...
View Answer

Correct Answer
verified
The Condorcet paradox applies directly t...
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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