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Exam 22: Frontiers of Microeconomics

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Question 91

Multiple Choice

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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:

A) 2-way stop wins the first vote and 2-way stop wins the second vote, so the town installs a 2-way stop.
B) 2-way stop wins the first vote and stoplight wins the second vote, so the town installs a stoplight.
C) 4-way stop wins the first vote and 4-way stop wins the second vote, so the town installs a 4-way stop.
D) 4-way stop wins the first vote and stoplight wins the second vote, so the town installs a stoplight.

E) A) and D)
F) A) and C)

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Question 92

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An example of asymmetric information is when a seller of a house knows more than the buyer about the house's condition.

A) True
B) False

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Question 93

Multiple Choice

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Table 22-8 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. Voter Type -Refer to Table 22-8. The town administrator is a huge basketball fan. If he wants to ensure that basketball is the winning sport, how should he set up the voting?

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 vote were conducted according to a Borda count system where each person's first choice receives 3 points, second choice 2 points, and third choice 1 point, the result would be

Which of the following statements is correct?

Screening occurs when

Which of the following is an example of an adverse selection problem?

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. Suppose voters first choose in a majority vote between W and X. Second, voters choose in a majority vote between the winner of the first vote and Y. Third, voters choose in a majority vote between the winner of the second vote and Z. Which alternative will win?

In a dictator game, player A must divide $100 between player A and player B. In this game, player B does not have the opportunity to reject an offer - he or she goes home with whatever player A offers. Experiments have observed that when player A splits the $100, he or she consistently offers over $10 to player B. Which of the following comments fits best.

Which of the following is an example of screening?

The field of political economy

An implication of the median voter theorem is that, in a race between Republicans and Democrats,

The mathematical result showing that, under certain assumptions, there is no scheme for aggregating individual preferences into a valid set of social preferences is called

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

Your city newspaper publishes a "Best of" poll that lists its readers' favorite restaurants. Mundo Bar and Grill is ranked as the best casual restaurant. Your best friend had dinner at Mundo Bar and Grill last week and commented that the food was mediocre and the service was slow. You decide not to have dinner at Mundo Bar and Grill based on your friend's experience. Your decision illustrates that people

Table 22-20 The table below shows the preferred city budget (in millions) for in the city of Springfield. -Refer to Table 22-20. In an election, each voter will select the budget closest to his or her most preferred budget. In which of the following cases does a budget of $32 win?

A brand of wine is priced at only $5 per bottle, far below the market price of most high quality wines. Before any reputation exists for the wine, consumers buy very little of this inexpensive wine because they interpret the low price to mean that the wine is of poor quality. The company decides to change the label on the wine to show that it has won awards for quality. This label change is an example of

Table 22-19 The 600 voters of Appleton are deciding by majority rule how much to spend on a new library. -Refer to Table 22-19. If an election were held between spending $2 million and $4 million, the median voter would vote for

Table 22-3 Three family members -- Seamus, Maeve, and Siobhan -- are deciding what type of movie to attend. The three choices are an action adventure, comedy, or horror. The first, second, and third choices for each person are as indicated in the table below. -Refer to Table 22-3. Suppose the three decide to make the decision based on pairwise majority voting. If they first choose between Action and Horror and then choose between the winner of the first vote and Comedy, which movie alternative will win?

Students of microeconomic principles often say they are going to study "tonight," because the only way to pass the exam is to study some every night. When "tonight" comes, some students choose to do something else. Come exam day, these students do not do well on their exam. This observation is an example of how people