Question 1

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

Question 2

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

Question 3

​​When a principal attempts to get an agent to reveal his or her private information, which of the following is occurring?

Accepted Answer

A)  ​Screening
B)  ​Signalling
C)  ​Moral hazard
D)  ​Adverse selectionE) All of the above
F) C) and D)

Question 4

Most economic models

Accepted Answer

A)  incorporate the assumption of rational behavior on the part of economic actors.
B)  incorporate the notion that people are usually reluctant to change their minds.
C)  are meant to precisely duplicate reality.
D)  assume that people often make sub-optimal choices.E) A) and B)
F) None of the above

Question 5

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

Accepted Answer

A)  A manager stays late one evening so that her employee can leave early to attend his child's music recital.
B)  A small child takes an extra cookie from the cookie jar when he thinks his mom isn't watching him closely.
C)  An employee plays solitaire on her computer at 4:30 p.m. on a Friday when her boss has left for the day.
D)  A customer whose new eyeglasses come with a "60-day insurance policy in case of breakage" leaves her glasses out where her new puppy can chew on them.E) A) and B)
F) A) and C)

Question 6

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Accepted Answer

A)  $500 and that the other player gets $500.
B)  $998 and that the other player gets $2.
C)  $999 and that the other player gets $1.
D)  $1000 and that the other player gets nothing.E) None of the above
F) All of the above

Question 7

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

Question 8

Which of the following is not an example of a systematic mistake that people make?

Accepted Answer

A)  When asked to predict how many movie stars he can list, Ed says 200 but when put to the test he can only name 130.
B)  Susan watched a home improvement show in which a contractor installed a faulty deck which collapsed within 2 years of installation. She is now concerned about the safety of her own deck.
C)  Kate's manager asks her to work additional hours for which she will be paid her usual hourly wage. Kate weighs the value of her leisure time against the additional wages before responding to her manager.
D)  Bill has purchased Skillman tools for years and has recently noticed a decline in quality and durability of Skillman tools. Still, when he needs a new drill, he purchases a Skillman brand drill.E) B) and C)
F) C) and D)

Question 9

The temptation of imperfectly-monitored workers to shirk their responsibilities is

Accepted Answer

A)  an example of the moral hazard problem.
B)  an example of the adverse selection problem.
C)  an example of screening.
D)  an example of signaling.E) B) and D)
F) None of the above

Question 10

The field of behavioral economics applies the methods of economics to study how government works.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following students exhibits satisficing behavior?

Accepted Answer

A)  Mick studies his economics notes every night so that he can be sure to earn a perfect score on his exam.
B)  Bill studies his economics notes for a few hours the night before the test because he will be satisfied with a C on his exam.
C)  Marguerite studies extensively as she will only be satisfied with a very high score.
D)  None of these students exhibits satisficing behavior.E) A) and B)
F) B) and C)

Question 12

Evidence from studies of workers' choices on whether to participate in 401(k)  plans suggests that the workers' behavior appears to exhibit

Accepted Answer

A)  indifference.
B)  ignorance.
C)  inertia.
D)  indecision.E) B) and C)
F) A) and D)

Question 13

Narrative 22-1
Katie owns a boutique that sells high-end women's clothing and accessories. Shana works part-time at the boutique and frequently is the only employee in this small store. Katie pays Shana a wage that is higher than the market wage for this type of job. When the store is not full of customers, Shana diligently works on displays and cleans to keep the store looking its best. Magda is a customer in the store who asks Shana's opinion on the quality of some jeans she is considering purchasing. Even though she's had several other customers return them due to flaws, Shana tells Magda the quality is great. Belinda is another customer who is returning a necklace without revealing that she lost a gem from it while wearing it.
-Refer to Narrative 22-1. Which of the ladies is a principal?

Accepted Answer

A)  Shana
B)  Katie
C)  Belinda
D)  MagdaE) A) and D)
F) A) and C)

Question 14

In corporations, which of the following are agents but not principals?

Accepted Answer

A)  shareholders
B)  the board of directors
C)  managers
D)  workersE) B) and C)
F) A) and D)

Question 15

Rather than always choosing the best course of action, humans make decisions that are merely good enough. In other words, they are

Accepted Answer

The answer of Rather than always choosing the best course...

Question 16

People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

Accepted Answer

The answer of People with hidden health problems are more...

Question 17

Studies of human decision-making have detected systematic mistakes that people make. Which of the following have been detected?

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

Question 18

Studies of human decision making have found that people are reluctant to change their minds.

Accepted Answer

A) True 
 B)False

Question 19

Domingo is a contestant on a trivia quiz show. For every state capital he can correctly identify, he will win $1,000. However, before identifying any capitals, he must decide how many he thinks he can correctly identify. If he cannot identify as many as he has wagered, Domingo will not win any money. Suppose Domingo says that he can correctly identify 42 state capitals for a potential payoff of $42,000. According to studies of human decision-making, what is most likely to happen?

Accepted Answer

A)  Domingo will be able to identify 42 state capitals and he will win $42,000.
B)  Domingo will be able to identify fewer than 42 state capitals and will not win any money.
C)  Domingo will not be able to identify any state capitals and will not win any money.
D)  Domingo will choose to save all of the money he wins on the quiz show for his retirement.E) A) and B)
F) All of the above

Question 20

The median voter theorem states that majority-rule political systems will produce policies that are most preferable for the median voter.​

Accepted Answer

A) True 
 B)False

Exam 22: Frontiers in Microeconomics

The temptation of imperfectly-monitored workers to shirk their responsibilities is

Correct Answer
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Which of the following students exhibits satisficing behavior?

Correct Answer
verified

Rather than always choosing the best course of action, humans make decisions that are merely good enough. In other words, they are

Correct Answer
verified

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

Correct Answer
verified

Which of the following is not an example of a systematic mistake that people make?

Correct Answer
verified

Correct Answer
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People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

Correct Answer
verified

The field of behavioral economics applies the methods of economics to study how government works.

Correct Answer
verified

When a principal attempts to get an agent to reveal his or her private information, which of the following is occurring?

Correct Answer
verified

Studies of human decision-making have detected systematic mistakes that people make. Which of the following have been detected?

Correct Answer
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In corporations, which of the following are agents but not principals?

Correct Answer
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Which of the following relationships involves asymmetric information?

Correct Answer
verified

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Correct Answer
verified

Correct Answer
verified

Evidence from studies of workers' choices on whether to participate in 401(k) plans suggests that the workers' behavior appears to exhibit

Correct Answer
verified

Studies of human decision making have found that people are reluctant to change their minds.

Correct Answer
verified

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

Correct Answer
verified

Most economic models

Correct Answer
verified

The median voter theorem states that majority-rule political systems will produce policies that are most preferable for the median voter.

Correct Answer
verified

Correct Answer
verified

Exam 22: Frontiers in Microeconomics

The temptation of imperfectly-monitored workers to shirk their responsibilities is

Correct AnswerverifiedShow Answer

Which of the following students exhibits satisficing behavior?

Correct AnswerverifiedShow Answer

Rather than always choosing the best course of action, humans make decisions that are merely good enough. In other words, they are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not an example of a systematic mistake that people make?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

Correct AnswerverifiedShow Answer

The field of behavioral economics applies the methods of economics to study how government works.

Correct AnswerverifiedShow Answer

​​When a principal attempts to get an agent to reveal his or her private information, which of the following is occurring?

Correct AnswerverifiedShow Answer

Studies of human decision-making have detected systematic mistakes that people make. Which of the following have been detected?

Correct AnswerverifiedShow Answer

In corporations, which of the following are agents but not principals?

Correct AnswerverifiedShow Answer

Which of the following relationships involves asymmetric information?

Correct AnswerverifiedShow Answer

Conventional economic theory suggests that in the ultimatum game, the player proposing a split of $50 will propose that she get $49 and that the other player get $1. By the same reasoning, if the amount to be split is $1000, the player proposing the split will propose that she gets

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Evidence from studies of workers' choices on whether to participate in 401(k) plans suggests that the workers' behavior appears to exhibit

Correct AnswerverifiedShow Answer

Studies of human decision making have found that people are reluctant to change their minds.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Most economic models

Correct AnswerverifiedShow Answer

The median voter theorem states that majority-rule political systems will produce policies that are most preferable for the median voter.​

Correct AnswerverifiedShow Answer

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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When a principal attempts to get an agent to reveal his or her private information, which of the following is occurring?

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
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Correct Answer
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The median voter theorem states that majority-rule political systems will produce policies that are most preferable for the median voter.

Correct Answer
verified

Correct Answer
verified