Question 1

The Feel Better Health Insurance Company is thinking about raising its rates for insurance.Which outcome is the least likely to happen if it does

Accepted Answer

A)  The percentage of its customers who are generally healthy will fall.
B)  The number of its customers with hidden health problems will fall.
C)  The number of customers who are generally healthy will fall.
D)  The firm's profit per customer will rise.E) C) and D)
F) A) and C)

Question 2

What can we say about the problem of asymmetric information

Accepted Answer

A)  It always arises from government intervention in private markets.
B)  It serves as a possible rationale for government intervention in private markets.
C)  It always amounts to a moral hazard problem.
D)  It does not affect prices consumers are willing to pay in the market.E) B) and D)
F) All of the above

Question 3

How can we use the theories of asymmetric information to analyze the 2007-2009 financial crisis

Accepted Answer

Asymmetric information makes lending mon...

Question 4

XYZ Company pays its workers very well.The wages of workers at XYZ significantly exceed regional and national averages for people who do similar work.In fact,all indications are that XYZ workers' wages are well above equilibrium levels.What might explain the fact that XYZ pays its workers so well

Accepted Answer

A)  There is no problem of asymmetric information at XYZ between the company's management and its workers.
B)  Workers at XYZ have never demonstrated any tendency to shirk.
C)  XYZ wants to maintain a good mix of workers in terms of their true abilities.
D)  XYZ is not worried about lemons.E) A) and C)
F) A) and B)

Question 5

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.Which statement regarding the Condorcet paradox and the results of pairwise voting in Elmongary is most accurate

Accepted Answer

A)  The paradox implies that pairwise voting never produces transitive preferences, and so the voting in Elmongary fails to produce transitive preferences.
B)  The paradox implies that pairwise voting sometimes (but not always)  produces transitive preferences, and the voting in Elmongary does produce transitive preferences.
C)  The paradox implies that pairwise voting sometimes (but not always)  fails to produce transitive preferences, and the voting in Elmongary fails to produce transitive preferences.
D)  The paradox implies that pairwise voting almost never produces transitive preferences, but the voting in Elmongary does produce transitive preferences.E) A) and D)
F) C) and D)

Question 6

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

Accepted Answer

A)  The government almost always has more information than the private parties.
B)  Private markets have no means of dealing with information asymmetries on their own.
C)  The government is itself an imperfect institution.
D)  Government intervention will exacerbate any market failures.E) A) and B)
F) C) and D)

Question 7

What is a person who makes decisions that are "merely good enough" called

Accepted Answer

A)  an optimizer
B)  a rationalizer
C)  a satisficer
D)  a minimizerE) A) and B)
F) A) and C)

Question 8

According to the median voter theorem,majority rule will produce an outcome that is inconsistent with transitive preferences.

Accepted Answer

A) True 
 B)False

Question 9

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $100 will propose that she gets $99 and that the other player gets $1.By the same reasoning,if the amount to be split is $200,what would the player proposing the split propose

Accepted Answer

A)  that she gets $100 and that the other player gets $100
B)  that she gets $198 and that the other player gets $2
C)  that she gets $199 and that the other player gets $1
D)  that she gets $200 and that the other player gets $0E) A) and B)
F) A) and C)

Question 10

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

Accepted Answer

A)  Neither party is well informed.
B)  One party is better informed than the other party.
C)  Both parties are equally well informed.
D)  The government is better informed than either of the two parties.E) A) and C)
F) C) and D) B

Question 11

What are the two basic problems involving asymmetric information

Accepted Answer

A)  moral dilemma and inverse-risk selection
B)  moral dilemma and adverse selection
C)  moral hazard and inverse-risk selection
D)  moral hazard and adverse selectionE) B) and D)
F) None of the above D

Question 12

A seller of a used car knows more than the buyer about the car's condition.What is this an example of

Accepted Answer

A)  a hidden action; specifically, it is an example of a hidden characteristic
B)  a hidden characteristic; specifically, it is an example of a hidden action
C)  an information asymmetry; specifically, it is an example of a hidden action
D)  an information asymmetry; specifically, it is an example of a hidden characteristicE) None of the above
F) A) and B)

Question 13

Arrow's impossibility theorem shows that it is impossible to find a better voting system than pairwise majority voting.

Accepted Answer

A) True 
 B)False

Question 14

What does the Arrow impossibility theorem show

Accepted Answer

A)  Democracy should be abandoned as a form of government.
B)  It is impossible to improve upon democratic voting methods as a mechanism for social choice.
C)  All voting systems are flawed as mechanisms for social choice.
D)  It is impossible to identify the median voter.E) B) and C)
F) A) and D) C

Question 15

The suggestion that people are satisficers is similar to which view

Accepted Answer

A)  People are wealth-maximizers.
B)  People are "near rational"
C)  People go to a lot of trouble to weigh costs and benefits before choosing a course of action.
D)  People frequently change their minds.E) B) and D)
F) None of the above

Question 16

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Accepted Answer

Asymmetric information is present when t...

Question 17

"People are too sure of their own abilities." What can be said about this observation

Accepted Answer

A)  It is at odds with traditional economic theory.
B)  It is at odds with evidence from experimental psychology.
C)  It supports the idea that people are rational in their decision-making processes.
D)  It assumes that people do not act out of self-interest.E) A) and C)
F) A) and B)

Question 18

An implication of the median voter theorem is that Conservatives and Liberals will try to align their views with those of the median voter.

Accepted Answer

A) True 
 B)False

Question 19

Majority rule will produce the outcome most preferred by the median voter.

Accepted Answer

A) True 
 B)False

Question 20

Evidence from experiments in which real people play the ultimatum game supports which idea about people

Accepted Answer

A)  They are rational wealth-maximizers.
B)  They tend to be driven by fairness, without regard for their own self-interest.
C)  They are driven by both fairness and self-interest.
D)  They have trouble calculating their own levels of wealth.E) C) and D)
F) A) and D)

Exam 22: Frontiers of Microeconomics

The Feel Better Health Insurance Company is thinking about raising its rates for insurance.Which outcome is the least likely to happen if it does

Correct Answer
verified

What can we say about the problem of asymmetric information

Correct Answer
verified

How can we use the theories of asymmetric information to analyze the 2007-2009 financial crisis

Correct Answer
verified
Asymmetric information makes lending mon...
View Answer

XYZ Company pays its workers very well.The wages of workers at XYZ significantly exceed regional and national averages for people who do similar work.In fact,all indications are that XYZ workers' wages are well above equilibrium levels.What might explain the fact that XYZ pays its workers so well

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

What is a person who makes decisions that are "merely good enough" called

Correct Answer
verified

According to the median voter theorem,majority rule will produce an outcome that is inconsistent with transitive preferences.

Correct Answer
verified

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $100 will propose that she gets $99 and that the other player gets $1.By the same reasoning,if the amount to be split is $200,what would the player proposing the split propose

Correct Answer
verified

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

Correct Answer
verified
B

What are the two basic problems involving asymmetric information

Correct Answer
verified
D

A seller of a used car knows more than the buyer about the car's condition.What is this an example of

Correct Answer
verified

Arrow's impossibility theorem shows that it is impossible to find a better voting system than pairwise majority voting.

Correct Answer
verified

What does the Arrow impossibility theorem show

Correct Answer
verified
C

The suggestion that people are satisficers is similar to which view

Correct Answer
verified

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Correct Answer
verified
Asymmetric information is present when t...
View Answer

"People are too sure of their own abilities." What can be said about this observation

Correct Answer
verified

An implication of the median voter theorem is that Conservatives and Liberals will try to align their views with those of the median voter.

Correct Answer
verified

Majority rule will produce the outcome most preferred by the median voter.

Correct Answer
verified

Evidence from experiments in which real people play the ultimatum game supports which idea about people

Correct Answer
verified

Exam 22: Frontiers of Microeconomics

The Feel Better Health Insurance Company is thinking about raising its rates for insurance.Which outcome is the least likely to happen if it does

Correct AnswerverifiedShow Answer

What can we say about the problem of asymmetric information

Correct AnswerverifiedShow Answer

How can we use the theories of asymmetric information to analyze the 2007-2009 financial crisis

Correct AnswerverifiedAsymmetric information makes lending mon...View AnswerShow Answer

XYZ Company pays its workers very well.The wages of workers at XYZ significantly exceed regional and national averages for people who do similar work.In fact,all indications are that XYZ workers' wages are well above equilibrium levels.What might explain the fact that XYZ pays its workers so well

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is a person who makes decisions that are "merely good enough" called

Correct AnswerverifiedShow Answer

According to the median voter theorem,majority rule will produce an outcome that is inconsistent with transitive preferences.

Correct AnswerverifiedShow Answer

Conventional economic theory suggests that in the ultimatum game,the player proposing a split of $100 will propose that she gets $99 and that the other player gets $1.By the same reasoning,if the amount to be split is $200,what would the player proposing the split propose

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

What are the two basic problems involving asymmetric information

Correct AnswerverifiedD

A seller of a used car knows more than the buyer about the car's condition.What is this an example of

Correct AnswerverifiedShow Answer

Arrow's impossibility theorem shows that it is impossible to find a better voting system than pairwise majority voting.

Correct AnswerverifiedShow Answer

What does the Arrow impossibility theorem show

Correct AnswerverifiedC

The suggestion that people are satisficers is similar to which view

Correct AnswerverifiedShow Answer

Explain what is meant by "asymmetric information." Identify and explain the two basic types of problems that arise when there is asymmetric information.

Correct AnswerverifiedAsymmetric information is present when t...View AnswerShow Answer

"People are too sure of their own abilities." What can be said about this observation

Correct AnswerverifiedShow Answer

An implication of the median voter theorem is that Conservatives and Liberals will try to align their views with those of the median voter.

Correct AnswerverifiedShow Answer

Majority rule will produce the outcome most preferred by the median voter.

Correct AnswerverifiedShow Answer

Evidence from experiments in which real people play the ultimatum game supports which idea about people

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Asymmetric information makes lending mon...
View Answer

Correct Answer
verified

Correct Answer
verified

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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B

Correct Answer
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D

Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Asymmetric information is present when t...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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