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Exam 22: Frontiers of Microeconomics

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Question 21

True/False

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

A) True
B) False

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Question 22

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Which of the following would be an example of a principal trying to deal with a moral hazard problem?

A) The parents of an infant secretly place video cameras in their house before the baby-sitter arrives.
B) An insurance company checks police records to determine if its policyholders have received traffic citations.
C) An employer examines his workers' output on a daily basis.
D) All of the above are correct.

E) C) and D)
F) B) and C)

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Question 23

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Table 22-14 The Johnson family is planning a vacation and,though Mr.and Mrs.Johnson will be paying for the trip,they have decided to use a democratic voting process to choose their destination.The family members' preferences are reflected in the table below. -Refer to Table 22-14.If the family uses a Borda count to make their decision,what is their vacation destination?

Table 22-1 Three friends -- Tricia,Sarah,and Katie -- are deciding where to go together for vacation.They all agree that they should go to one of three places: Ireland,Italy,or Greece.They also agree that they will have two pairwise votes to determine where to go on vacation,with the majority determining the outcome on each vote.The first,second,and third choices for each person are as indicated in the table below. -Refer to Table 22-1.If the friends change their minds and decide to choose a vacation destination using a Borda count,then

Table 22-1 The citizens of Mayville are having a severe budget shortage and are faced with eliminating athletics from the town high school.The town administrator has determined that the town can afford to maintain one sport.Exactly one of the three 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. -Refer to Table 22-1.If the town decides to use a Borda count,which sport will win?

Which of the following is a plausible explanation for a firm paying above-equilibrium wages to its workers?

If preferences exhibit the property of transitivity,then

Table 22-6 -Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: A,B,and C.The table also shows the percentage of voters of each type.Based on this information,which voter type is the median voter?

Economic experiments show that people care more about winning a game than about its intrinsic fairness.

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

Table 22-2 A high school Spanish class and their teacher are planning to take a Spring Break trip abroad but they have to decide where to go.They have narrowed the options to: Spain,Mexico,Ecuador,and Costa Rica.The voters' preferences are shown in the table below. -Refer to Table 22-2.If a Borda count is used,the class trip will be to

Manuel buys automobile insurance from Ax-i-Dent Insurance Company.If Manuel avoids having an accident for three years,Ax-i-Dent will reduce the price he has to pay for his insurance.Nevertheless,he routinely drives fast and with reckless abandon.

Table 22-2 Three longtime friends-Jack,Ryan,and Colin-are deciding how they will spend their Sunday afternoon.They all agree that they should do one of three things: go to a movie,go to the zoo,or go to a museum.They also agree that they will have two pairwise votes to determine how to spend their evening,with the majority determining the outcome on each vote.The first,second,and third choices for each person are as indicated in the table below. -Refer to Table 22-2.Which of the following statements is correct?

Scenario 22-4 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 Scenario 22-4.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:

Which of the following is an example of screening?

Insurance companies charge annual premiums to collect revenue,which they then use to pay customers who file claims for damages they incur.As a result of the moral hazard problem (1) what is the effect on the percentage of policy holders making claims,and (2) what is the effect on the average premium charged when compared to a world with no moral hazard problem?

One property of Kenneth Arrow's "perfect" voting system is that the ranking between any two outcomes A and B should not depend on whether some third outcome C is also available.Arrow called this property

An unhealthy person would likely choose a medical insurance policy with a

Table 22-6 -Refer to Table 22-6.The table shows the preferences of three types of voters over three possible outcomes: A,B,and C.In addition,the table shows the percentage of voters of each type.Based on this information,which of the following statements is true?

Kevin borrowed some money from Hi Interest Bank,telling the loan officer that he intended to use the money to make repairs to his home.After getting the loan,Kevin and his girlfriend immediately took the money and headed to the nearest riverboat casino for a weekend of gambling and entertainment.