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Exam 22: Frontiers in Microeconomics

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Question 71

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Scenario 22-4 ​ Three members of the DiCarlo family, Vinny, Maria, and Franki, are choosing the entree for a large family reunion. Their options are: spaghetti, ravioli, lasagne, and pizza. Vinny prefers spaghetti over lasagne, lasagne over ravioli, and ravioli over pizza. Maria prefers ravioli over spaghetti, spaghetti over pizza, and pizza over lasagne. Frankie prefers pizza over ravioli, ravioli over lasagne, and lasagne over spaghetti. -Refer to Scenario 22-4. Vinny recommends using a vote by majority rule and wants to be sure that his first choice becomes the winner. Which order should he should propose to use for pairwise voting to ensure his desired outcome?

A) first choosing between ravioli and spaghetti, then choosing between the winner of the first vote and pizza, and finally choosing between the winner of the second vote and lasagne
B) first choosing between pizza and spaghetti, then choosing between the winner of the first vote and lasagne, and finally choosing between the winner of the second vote and ravioli
C) first choosing between lasagne and pizza, then choosing between the winner of the first vote and ravioli, and finally choosing between the winner of the second vote and spaghetti
D) None of the proposed voting orders will result in Vinny's first choice winning the vote.

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

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Question 72

Multiple Choice

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When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night, it is an example of

A) both moral hazard and adverse selection.
B) neither moral hazard nor adverse selection.
C) moral hazard, but not adverse selection.
D) adverse selection, but not moral hazard.

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

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Question 73

Multiple Choice

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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 X and Y, what percentage of the votes would X receive?

Table 22-25 Sophie, Huan, and Santiago are lost with no map or GPS available. They come to an intersection at which they can turn left, turn right, or continue going straight. Their preferences are summarized in the table. -Refer to Table 22-25. The travelers decide to conduct pairwise voting with the majority determining the outcome of each vote to decide their next move. Sophie is very confident that the travelers need to go left but she is having a difficult time convincing her friends. If she wants to ensure that the result of the voting is "left," how should she organize the voting?

Government action in cases of asymmetric information may not be an ideal solution because

Table 22-22 The town of Fairview is considering a renovation to the high school. The voters in Fairview have different preferences on the budget for the renovation as displayed below. -Refer to Table 22-22. If there is a vote between a budget of $12 million and $16 million, the median voter will vote to spend

A safe driver would likely choose an auto insurance policy with a

Table 22-11 Five voters must choose from among four options: A, B, C, or D. Each voter's preferences are summarized in the table below. Options higher in the table are more preferred by the voter. -Refer to Table 22-11. If the vote were conducted according to a Borda count system where each person's first choice receives 4 points, second choice 3 points, third choice 2 points and fourth choice 1 point, the result would be

Table 22-5 The citizens of Anytown will decide whether to build a new library, a recreation center, or an arena. 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 22-5. Which of the following statements is correct?

Table 22-1 Three friends -- Linda, Stephanie, and Jamie -- are deciding where to go together for vacation. They all agree that they should go to one of three places: France, Greece, or Italy. 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 first vote pits Greece against Italy and the second vote pits France against the winner of the first vote, then the outcome is as follows:

Kenneth Arrow proved that the voting system that satisfied all of the properties of his "perfect" voting system was

Table 22-10 The town of Franklin is facing a severe budget shortage. The town administrator has proposed four options to balance the budget: increase property taxes (taxes) , cut the school arts budget (arts) , turn off half of the streetlights in the town (streetlights) , reduce police patrols (police) . Exactly one of the four 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 22-10. If a Borda count is used, which option will win?

A home has been on the market for an extended amount of time without much interest from buyers. The sellers decide to purchase and include a home warranty insuring against major defects with the home. The warranty is an example of a(n)

When some people are better informed than others and the imbalance affects the choices they make, economists say there is

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?

You own an ice cream store and are concerned that an employee may be giving generous scoops to friends and relatives and smaller scoops to some other customers. This may be reducing sales. In this example, you are the

Jane spends 85% of her income each year, even though she knows she should be saving 20% for retirement. Jane's behavior indicates that her behavior tends to be

In the context of an ultimatum game, the first player proposes a split of $100 to a second player. The second player can either accept the split or both players receive $0. A rational second player will accept any offer ​

Table 22-25 Sophie, Huan, and Santiago are lost with no map or GPS available. They come to an intersection at which they can turn left, turn right, or continue going straight. Their preferences are summarized in the table. -Refer to Table 22-25. The travelers decide to conduct pairwise voting with the majority determining the outcome of each vote to decide their next move. If they first choose between going left and going right, and then choose between the winner of the first vote and going straight, which direction will they go?

Peter was recently hired as a salesman for a national consulting firm. His job involves spending a significant portion of his time out of the office visiting prospects and attending conferences. Which of the following is a strategy the consulting firm may employ to discourage Peter from shirking his responsibilities?