Question 1

The subfield of behavioral economics that examines how economic decision making affects areas of the brain is called _____

Accepted Answer

A)  rational economics.
B)  neuroeconomics.
C)  environmental economics.
D)  developmental economics.
E)  scientific economics.

Question 2

When a firm is operating at its minimum efficient scale,its short-run marginal cost of production is minimized.

Accepted Answer

A) True 
 B)False

Question 3

In which of the situations described below is the principal-agent problem least likely to occur?

Accepted Answer

A)  a patient using hospital services
B)  a doctor visiting a patient at home
C)  a bartender serving an individual at a bar
D)  a mechanic repairing a television set
E)  a stockbroker offering financial advice to a client

Question 4

Exhibit 14.2
 
-Refer to Exhibit 14.2,which shows the marginal cost and the marginal benefit of information curves.I* reflects _____

Accepted Answer

A)  that marginal benefit equals marginal cost.
B)  that the value of additional information is zero.
C)  that the marginal cost is zero.
D)  adverse selection.
E)  that all information is costly. A

Question 5

One result of asymmetric information in the market for used cars is that buyers benefit at the expense of sellers.

Accepted Answer

A) True 
 B)False

Question 6

Screening is the attempt by the uninformed party to select the best workers based on observable characteristics of the informed party.

Accepted Answer

A) True 
 B)False  True

Question 7

A person or firm who hires an agent to act on their behalf is called the _____

Accepted Answer

A)  principal.
B)  agent.
C)  buyer.
D)  seller.
E)  winner.

Question 8

Exhibit 14.2
 f reflects _____ A) that marginal benefit equals the marginal cost. B) that the value of additional information is zero. C) that the marginal cost is zero. D) adverse selection. E) that all information is costly." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 14.2,which shows the marginal cost and the marginal benefit of information curves.If reflects _____

Accepted Answer

A)  that marginal benefit equals the marginal cost.
B)  that the value of additional information is zero.
C)  that the marginal cost is zero.
D)  adverse selection.
E)  that all information is costly.

Question 9

At Tony's Car Wash,a team of four workers washes and rinses each car by hand and one worker dries the car by hand.Which of the following is true?

Accepted Answer

A)  Tony will not face any principal-agent problem in performance evaluation.
B)  Tony will face more problems in performance evaluation in washing and rinsing than in drying the cars.
C)  Tony will face more problems in performance evaluation in drying than in washing and rinsing the cars.
D)  Tony will face similar problems in performance evaluation in washing, rinsing, and drying.
E)  Tony will not have an incentive to monitor the car wash, as the productivity of the workers is same.

Question 10

Exhibit 14.3
 2,it implies that _____ A) she has made the optimal search. B) she has avoided the cost of acquiring information. C) she has searched too much. D) further information will be costless to her. E) she should increase her search." class="answers-bank-image d-inline" rel="preload" >
-Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.If a consumer gathers an amount of information equal to I2,it implies that _____

Accepted Answer

A)  she has made the optimal search.
B)  she has avoided the cost of acquiring information.
C)  she has searched too much.
D)  further information will be costless to her.
E)  she should increase her search.

Question 11

In the market for used cars,car owners have abundant personal experience with the important characteristics of the vehicle that they are selling.However,a prospective buyer can only guess the characteristics based on each car's appearance.Which of the following problems arises because of this information mismatch?

Accepted Answer

A)  the principal-agent problem
B)  the problem of the winner's curse
C)  the problem of adverse selection
D)  the problem of common resources
E)  the problem of unbounded rationality

Question 12

Exhibit 14.3
 
-Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.Identify a likely impact of a new technology that requires consumers to spend less time searching for information.

Accepted Answer

A)  a rightward shift of the marginal cost of information curve
B)  a rightward shift of the marginal benefit of information curve
C)  a leftward shift of the marginal cost of information curve
D)  a leftward shift of the marginal benefit of information curve
E)  an increase in common knowledge

Question 13

Darryl graduated from college with outstanding grades.However,he obtained his outstanding grades by cheating on every final exam with help from his best friend.Nevertheless,he gets a job with a top accounting firm in Boston.The fact that he is hired illustrates a failure of _____

Accepted Answer

A)  the efficiency wage theory.
B)  signaling and screening.
C)  the marginal productivity theory.
D)  the supply and demand theory.
E)  outsourcing and specialization.

Question 14

Imperfect information among the potential bidders of a cable TV franchise results in a final bid that is more than the market value of a franchise.This situation is an example of _____

Accepted Answer

A)  moral hazard.
B)  an authority relation.
C)  the winner's curse.
D)  the tragedy of the commons.
E)  adverse selection. C

Question 15

A situation in which one party makes a contractual agreement with a second party in the expectation that the second party will act on its behalf is known as _____

Accepted Answer

A)  collusion.
B)  a horizontal agreement.
C)  an authority relation.
D)  a principal-agent problem.
E)  a vertical agreement.

Question 16

If the quality of an input is easily determined at the time of purchase,then it is likely to _____

Accepted Answer

A)  result in high transaction costs of using markets.
B)  encourage horizontal integration of the production process.
C)  encourage supplier firms to produce low-quality inputs.
D)  be produced internally by a firm.
E)  be purchased in the market.

Question 17

Bounded rationality _____

Accepted Answer

A)  borrows insights from psychology to help explain economic choices.
B)  maps brain activity while subjects make economic choices.
C)  describes a more realistic conception of human problem-solving ability.
D)  assumes that people act rationally.
E)  assumes that people pursue their rational self-interest.

Question 18

Neuroeconomics _____

Accepted Answer

A)  borrows insights from psychology to help explain economic choices.
B)  maps brain activity while subjects make economic choices.
C)  describes a more realistic conception of human problem-solving ability.
D)  assumes that people act rationally.
E)  assumes that people pursue their rational self-interest.

Question 19

Exhibit 14.3
 
-Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.The marginal benefit curve shows that _____

Accepted Answer

A)  as consumers become more familiar with a market, additional information yields less and less marginal utility.
B)  the marginal benefit of information increases as a consumer spends more and more time acquiring information.
C)  greater and greater distances must be covered to acquire a marginal piece of information.
D)  the cost of gathering information diminishes as more of it is gathered.
E)  common knowledge alone is enough to decide consumer choice.

Question 20

Which of these problems is encountered in labor markets where the abilities of the workers are intangible or unmeasurable?

Accepted Answer

A)  the problem of increasing opportunity cost
B)  the adverse selection problem
C)  the moral hazard problem
D)  the winner's curse problem
E)  the problem of diminishing marginal productivity

Exam 14: Transaction Costs, asymmetric Information, and Behavioral Economics

The subfield of behavioral economics that examines how economic decision making affects areas of the brain is called _____

Correct Answer
verified

When a firm is operating at its minimum efficient scale,its short-run marginal cost of production is minimized.

Correct Answer
verified

In which of the situations described below is the principal-agent problem least likely to occur?

Correct Answer
verified

Exhibit 14.2 -Refer to Exhibit 14.2,which shows the marginal cost and the marginal benefit of information curves.I* reflects _____

Correct Answer
verified
A

One result of asymmetric information in the market for used cars is that buyers benefit at the expense of sellers.

Correct Answer
verified

Screening is the attempt by the uninformed party to select the best workers based on observable characteristics of the informed party.

Correct Answer
verified
True

A person or firm who hires an agent to act on their behalf is called the _____

Correct Answer
verified

Exhibit 14.2 -Refer to Exhibit 14.2,which shows the marginal cost and the marginal benefit of information curves.I_f reflects _____

Correct Answer
verified

At Tony's Car Wash,a team of four workers washes and rinses each car by hand and one worker dries the car by hand.Which of the following is true?

Correct Answer
verified

Exhibit 14.3 -Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.If a consumer gathers an amount of information equal to I₂,it implies that _____

Correct Answer
verified

Correct Answer
verified

Exhibit 14.3 -Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.Identify a likely impact of a new technology that requires consumers to spend less time searching for information.

Correct Answer
verified

Darryl graduated from college with outstanding grades.However,he obtained his outstanding grades by cheating on every final exam with help from his best friend.Nevertheless,he gets a job with a top accounting firm in Boston.The fact that he is hired illustrates a failure of _____

Correct Answer
verified

Imperfect information among the potential bidders of a cable TV franchise results in a final bid that is more than the market value of a franchise.This situation is an example of _____

Correct Answer
verified
C

A situation in which one party makes a contractual agreement with a second party in the expectation that the second party will act on its behalf is known as _____

Correct Answer
verified

If the quality of an input is easily determined at the time of purchase,then it is likely to _____

Correct Answer
verified

Bounded rationality _____

Correct Answer
verified

Neuroeconomics _____

Correct Answer
verified

Exhibit 14.3 -Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.The marginal benefit curve shows that _____

Correct Answer
verified

Which of these problems is encountered in labor markets where the abilities of the workers are intangible or unmeasurable?

Correct Answer
verified

Exam 14: Transaction Costs, asymmetric Information, and Behavioral Economics

The subfield of behavioral economics that examines how economic decision making affects areas of the brain is called _____

Correct AnswerverifiedShow Answer

When a firm is operating at its minimum efficient scale,its short-run marginal cost of production is minimized.

Correct AnswerverifiedShow Answer

In which of the situations described below is the principal-agent problem least likely to occur?

Correct AnswerverifiedShow Answer

Exhibit 14.2 -Refer to Exhibit 14.2,which shows the marginal cost and the marginal benefit of information curves.I* reflects _____

Correct AnswerverifiedA

One result of asymmetric information in the market for used cars is that buyers benefit at the expense of sellers.

Correct AnswerverifiedShow Answer

Screening is the attempt by the uninformed party to select the best workers based on observable characteristics of the informed party.

Correct AnswerverifiedTrue

A person or firm who hires an agent to act on their behalf is called the _____

Correct AnswerverifiedShow Answer

Exhibit 14.2 -Refer to Exhibit 14.2,which shows the marginal cost and the marginal benefit of information curves.If reflects _____

Correct AnswerverifiedShow Answer

At Tony's Car Wash,a team of four workers washes and rinses each car by hand and one worker dries the car by hand.Which of the following is true?

Correct AnswerverifiedShow Answer

Exhibit 14.3 -Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.If a consumer gathers an amount of information equal to I2,it implies that _____

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 14.3 -Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.Identify a likely impact of a new technology that requires consumers to spend less time searching for information.

Correct AnswerverifiedShow Answer

Darryl graduated from college with outstanding grades.However,he obtained his outstanding grades by cheating on every final exam with help from his best friend.Nevertheless,he gets a job with a top accounting firm in Boston.The fact that he is hired illustrates a failure of _____

Correct AnswerverifiedShow Answer

Imperfect information among the potential bidders of a cable TV franchise results in a final bid that is more than the market value of a franchise.This situation is an example of _____

Correct AnswerverifiedC

A situation in which one party makes a contractual agreement with a second party in the expectation that the second party will act on its behalf is known as _____

Correct AnswerverifiedShow Answer

If the quality of an input is easily determined at the time of purchase,then it is likely to _____

Correct AnswerverifiedShow Answer

Bounded rationality _____

Correct AnswerverifiedShow Answer

Neuroeconomics _____

Correct AnswerverifiedShow Answer

Exhibit 14.3 -Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.The marginal benefit curve shows that _____

Correct AnswerverifiedShow Answer

Which of these problems is encountered in labor markets where the abilities of the workers are intangible or unmeasurable?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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A

Correct Answer
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Correct Answer
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True

Correct Answer
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Exhibit 14.2 -Refer to Exhibit 14.2,which shows the marginal cost and the marginal benefit of information curves.I_f reflects _____

Correct Answer
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Correct Answer
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Exhibit 14.3 -Refer to Exhibit 14.3,which shows the marginal cost and the marginal benefit of information curves.If a consumer gathers an amount of information equal to I₂,it implies that _____

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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