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Exam 22: Frontiers of Microeconomics

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Question 71

Multiple Choice

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Robert and Neal are playing the ultimatum game, starting with $100. Based on the coin toss, Robert is the player to propose a division of the $100. If Robert acts as economic theory assumes and Neal acts as experimental evidence shows, Neal will

A) accept Robert's proposal of keeping $99 and offering Neal $1.
B) accept Robert's proposal of keeping $60 and offering Neal $40.
C) reject Robert's proposal of keeping $99 and offering Neal $1.
D) reject Robert's proposal of keeping $60 and offering Neal $40.

E) None of the above
F) A) and B)

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Question 72

Multiple Choice

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Table 22-16 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 22-16. Suppose that before the family can arrive at their decision, Opryland announced that it will be closed for the season due to flooding. If the family uses a Borda count, their vacation destination will be

A) Grand Canyon
B) Sea World
C) Disneyland
D) There is a tie between the Grand Canyon and Disneyland.

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

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Question 73

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Budweiser typically purchases several 30 second advertising spots during the Super Bowl at a very high cost. Miller Brewing Co. typically does not advertise during the Super Bowl. Which of the following is correct?

Don is convinced that it would be best if the U.S. was on a gold standard. He enthusiastically reads any editorials or articles that confirm his view. He frequently dismisses editorials and articles that argue against the gold standard because he presumes they are flawed or written by "crackpots." Don's behavior is an example of which of the following systematic mistakes that people make?

Evidence from experiments in which real people play the ultimatum game supports the idea that people care about fairness as well as about maximization of their personal wealth.

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?

Suppose that there are 175 voters in an election and that 80 of them prefer a $100 budget while the remainder prefer a $150 budget. Which of the following statements is true?

The fact that someone with a high risk of medical problems is likely to buy a large amount of health insurance is an example of

Table 22-2 Three longtime friends-Allen, Brian, and Cody-are deciding how they will spend their Sunday afternoon. They all agree that they should do one of three things: go to a movie, play golf, or go to a baseball game. They also agree that they will have two pairwise votes to determine how to spend their afternoon, 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?

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?

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. If the voting method is a Borda count, which alternative will be chosen?

The Condorcet paradox shows that there is no scheme for aggregating individual preferences into a valid set of social preferences.

Susan buys automobile insurance from Provident Insurance Company. If Susan avoids having an accident for three years, Provident will reduce the premiums she has to pay for her insurance. Nevertheless, she routinely drives while eating or texting and speeds up to try to make it through yellow lights.

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. Which of the following is correct for this election? There is

Condorcet explained his paradox in a 1951 book called Social Choice and Individual Values.

Table 22-13 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 22-13. In a pairwise election between Costa Rica and Ecuador and then a second election between the winner and Mexico, which countries are chosen?

People with hidden health problems are more likely to buy health insurance than other people. As a result, people in average health may observe the high prices of insurance and decide not to buy it. This is an example of

If preferences exhibit the property of transitivity, then

Studies of human decision-making have found that people do not give enough weight to a small number of vivid observations.

The classic example of adverse selection is the market for used cars.