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Exam 23: Frontiers of Microeconomics

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Question 21

True/False

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Given asymmetric information, car insurance companies might encourage risky drivers to identify themselves by offering a high-premium policy without a deductible.

A) True
B) False

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Question 22

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Table 23 - 1 $\begin{array}{|l|l|l|l|}\hline \text { Rank }&\text { Brent's preferences } & \text { Frida's preferences } & \text { Jess's preferences } \\\hline 1^{\text {st }} \text { choice }&\text { Daft Punk } & \text { Najwa Karam } & \text { Paul Kelly } \\\hline 2^{1 \mathrm{nd}} \text { choice }&\text { Paul Kelly } & \text { Daft Punk } & \text { Najwa Karam } \\\hline 3^{\text {rd }} \text { choice }&\text { Najwa Karam } & \text { Paul Kelly } & \text { Daft Punk } \\\hline\end{array}$ -Refer to Table 23-1.With pairwise voting, and starting with a comparison between Daft Punk and Najwa Karam, which album will they listen to?

A) Daft PunK
B) Paul Kelly
C) Najwa Karam
D) it cannot be determined

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

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Question 23

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The insights of behavioural economics suggest that assuming rational behaviour of consumers is not always correct.

Political economy is also referred to as public:

Economists:

Behavioural economists argue that:

The Condorcet paradox illustrates how:

An implication of the median voter theorem is that, in a democratic voting system, minority views are given significant weight.

It is often difficult for a customer to know the quality of a 3-D television.If a television manufacturer advertises its 3-D televisions then:

If monitoring by a principal is imperfect, it is less likely that a moral hazard problem will arise.

Table 23 - 1 $\begin{array}{|l|l|l|l|}\hline \text { Rank }&\text { Brent's preferences } & \text { Frida's preferences } & \text { Jess's preferences } \\\hline 1^{\text {st }} \text { choice }&\text { Daft Punk } & \text { Najwa Karam } & \text { Paul Kelly } \\\hline 2^{1 \mathrm{nd}} \text { choice }&\text { Paul Kelly } & \text { Daft Punk } & \text { Najwa Karam } \\\hline 3^{\text {rd }} \text { choice }&\text { Najwa Karam } & \text { Paul Kelly } & \text { Daft Punk } \\\hline\end{array}$ -Refer to Table 23-1.With pairwise voting, and starting with a comparison between Daft Punk and Paul Kelly, which album will they listen to?

Which of the following is an example of adverse selection?

Studies suggest that:

Loss aversion means that commitment strategies that generate potential losses are more likely to change behaviour than strategies that generate the equivalent money gain.

Information asymmetries do not impede the efficient functioning of markets.

Screening is an action taken by an uninformed party to induce an informed party to reveal information.

The social scientist Herbert Simon is famous for his work in:

Table 23 - 1 $\begin{array}{|l|l|l|l|}\hline \text { Rank }&\text { Brent's preferences } & \text { Frida's preferences } & \text { Jess's preferences } \\\hline 1^{\text {st }} \text { choice }&\text { Daft Punk } & \text { Najwa Karam } & \text { Paul Kelly } \\\hline 2^{1 \mathrm{nd}} \text { choice }&\text { Paul Kelly } & \text { Daft Punk } & \text { Najwa Karam } \\\hline 3^{\text {rd }} \text { choice }&\text { Najwa Karam } & \text { Paul Kelly } & \text { Daft Punk } \\\hline\end{array}$ -Refer to Table 23-1.With pairwise voting, and starting with a comparison between Paul Kelly and Najwa Karam, which album will they listen to?

Herbert Simon suggested that people should be treated as satisficers rather than rational maximisers.

According to the median voter theorem, majority rule will produce the outcome: