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Exam 22: Frontiers of Microeconomics

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Question 1

Multiple Choice

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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. If the mayor asks the residents to choose between the playground and the library using pairwise voting,

A) the playground wins by 45%.
B) the playground wins by 60%.
C) the library wins by 20%.
D) the library wins by 80%.

E) None of the above
F) C) and D)

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Question 2

Multiple Choice

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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?

A) The government rarely has more information than the private parties.
B) Private markets can sometimes deal with information asymmetries on their own.
C) The government is itself an imperfect institution.
D) All of the above are valid concerns.

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

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Question 3

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Researchers have found that the systematic mistakes that people make in their decision making include a lack of confidence in their own abilities.

Table 22-15 Diane, Henry, and Linda are voting for who to promote. They can only promote one candidate. Their preferences are given in the table below. -Refer to Table 22-15. If elections were held where voters choose either Fred or Beth, and then choose either the winner or Mary, what would the results be?

Signaling is an action taken by an uninformed party to induce an informed party to reveal information.

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 stoplight against a 4-way stop and the second vote pits a 2-way stop against the winner of the first vote, then the outcome is as follows:

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. Below are lists of results for two separate elections between two candidates. In which case are both results correct?

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?

Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it.

The assertion that the median voter is "king" refers directly to the result established by the

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

Adverse selection may lead to

Table 22-18 The following table shows the preferences of four types of voters over four possible alternatives as well as the percentage of the electorate with the given preferences. -Refer to Table 22-18. In a majority vote between alternatives W and X, what percentage of the votes would W receive?

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. If the mayor asks the residents to choose between the library and the swimming pool using pairwise voting,

The mathematical result showing that a majority rule voting system will produce the outcome most preferred by the voter exactly in the middle of the distribution is called the

Behavioral economics

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 4-way stop and the second vote pits a stoplight against the winner of the first vote, then the outcome is as follows:

The Condorcet paradox tells us that, even though it is impossible to satisfy all of Arrow's properties of a desirable voting system, pairwise majority voting will always satisfy transitivity.

When asymmetric information affects a relationship between two parties, it is always the case that

The moral-hazard problem and the desire of firms to lessen that problem serve as a plausible explanation for a firm paying above-equilibrium wages to its workers.