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Exam 22: Frontiers of Microeconomics

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Question 1

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Scenario 22-6 Shana owns a boutique that sells high­end women's clothing and accessories. Katie works part-time at the boutique and frequently is the only employee in this small store. Shana pays Katie a wage that is higher than the market wage for this type of job. When the store is not full of customers, Katie diligently works on displays and cleans to keep the store looking its best. Belinda is a customer in the store who asks Katie's opinion on the quality of some jeans she is considering purchasing. Katie tells her the quality is great even though she's had several other customers return them due to flaws. Magda is another customer who is returning a necklace without volunteering that a gem is missing. -Refer to Scenario 22-6. What is the term for the type of wage Shana pays Katie?

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efficiency wage

Question 2

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Economists use basic psychological insights in the field of study called

A) psychological economics.
B) transitional economics.
C) behavioral economics.
D) social economics.

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

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Question 3

Multiple Choice

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An implication of the median voter theorem is that

When economists assume that people are rational, they assume that

Studies of human decision making have found that people are reluctant to change their minds.

Table 22-21 The following table shows the number of voters preferring various amounts of spending to develop a river to make it more attractive for canoeing and kayaking. -Refer to Table 22-21. Suppose the voters are asked to choose between $1 million and $2.5 million. If all voters cast a vote for the spending amount closest to their own preference, how many votes will the $1 million spending amount receive?

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?

When a jeweler sells a low quality diamond to a young man who believes the diamond is the highest quality, she is engaging in

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow defined a "perfect" voting system. That system includes which of the following features?

Scenario 22-5 A wireless telephone service provider offers three service plans to its consumers. -Refer to Scenario 22-5. By offering consumers these choices and allowing them to select the plan that best meets their needs, the wireless service provider is engaging in

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. The town administrator would much rather have more tax revenue than have to cut any programs or services. If he wants to ensure that winning choice from voting is increasing taxes, how should he set up the voting?

The ultimatum game reveals that

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. If the town administrator first asks the citizens to vote for hockey or basketball and then asks them to choose between the winner of the first vote and football, what will be the outcome?

Scott's Painting Company paints houses. Since Scott's business does not have the name recognition of some of the bigger painting companies, Scott advertises a "Five-Year Money Back Guarantee" to indicate to buyers that his service is of high quality. This guarantee is an example of

Bill and Bev are playing the ultimatum game, starting with $50. A coin flip results in Bev being the one to propose a division of the $50. If Bev acts as economic theory assumes, she should propose that

Scenario 22-3 At issue in a particular city vote is how much to spend, per person, on road repair next year. Among the 10,000 voters, 2,900 prefer to spend $500 per person, but no more; 2,200 prefer to spend $600 per person, but no more; 1,900 prefer to spend $800 per person, but no more; 1,600 prefer to spend $1,200 but no more, and 1,400 prefer to spend $1,400 per person, but no more. -Refer to Scenario 22-3. If there is a vote on whether to spend $600 per person or $800 per person, the median voter will vote to spend

The field of economics in which the tools of economics are used to understand the functioning of government is

Assume there are nine voters in a certain small town and let x = the preferred number of dollars spent per person per month on garbage collection. For Voters 1, 2, and 3, x = $10; for Voter 4, x = $15; for Voter 5, x = $18; and for Voters 6, 7, 8 and 9, x = $20. Based on these preferences, which of these dollar amounts will win over any one of the others?

Moral hazard occurs when

In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term "unanimity" to mean