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Asymmetric information is a problem that occurs when one person in a transaction knows more about what is going on than the other.

In the principal-agent relationship, the principal performs a task on behalf of the agent.

Employers may pay higher than equilibrium wages to avoid moral hazard in the employment relationship by raising the cost of shirking.

To avoid the problem of adverse selection, insurance companies screen their prospective customers to discover hidden health problems.

Signals to convey high quality are most effective when they are costless to all firms in the industry.

If A is preferred to B, B preferred to C, and A is preferred to C, then these preferences exhibit the property of unanimity.

The Condorcet paradox shows that majority-rule voting always tells us the outcome that society really wants.

Arrow's impossibility theorem shows that no voting system can satisfy the properties required of a perfect voting system.

According to the median voter theorem, majority rule will produce the average preferred outcome.

Politicians do not always choose the ideal economic policy because some politicians are corrupt and greedy, and others are willing to sacrifice the national interest for local popularity.

In the real world, people always behave rationally when making economic decisions.

The ultimatum game demonstrates that people will always make choices according to their self-interest.

Since people tend to care about fairness, firms may give bonuses during particularly profitable years to be fair and to avoid retaliation from the workers.

People seem to naturally engage in delayed gratification and they tend to follow through on plans made today to do something unpleasant in the future.

Since people are reluctant to change their minds in the face of new information, we can conclude that people do not always behave as rational maximizers.

John's car is in need of repair so John decides to sell it to avoid the repair bill. Unaware of the problem, Suzanne buys the car. This is an example of

Nicole wants to avoid buying a car that is a lemon. She takes a car she would like to buy to her mechanic before she purchases it. This is known as

Markus is a travelling salesman for an apparel company. In this employment relationship, Markus is the

Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective? It must be:

Which of the following is an example of a signal that is used to reveal private information?

Which of the following is not a method firms use to avoid the moral hazard problem in the employment relationship? They:

Which of the following best demonstrates the problem of moral hazard?

If A is preferred to B and B to C then A must be preferred to C. This is an example of the axiom of:

Figure 22-1

	Voter type
	Type 1	Type 2	Type 3
Percent of electorate	35	25	40
First choice	C	A	B
Second choice	A	B	C
Third choice	B	C	A

Refer to Figure 22-1. What percent of the population votes for A when the choice is between A and B?

Figure 22-1

	Voter type
	Type 1	Type 2	Type 3
Percent of electorate	35	25	40
First choice	C	A	B
Second choice	A	B	C
Third choice	B	C	A

Refer to Figure 22-1. Under pairwise majority voting, which outcome wins?

Figure 22-1

	Voter type
	Type 1	Type 2	Type 3
Percent of electorate	35	25	40
First choice	C	A	B
Second choice	A	B	C
Third choice	B	C	A

     
Refer to Figure 22-1. If we first compare A to C, and then compare the winner to B, which outcome is the winner?

Figure 22-1

	Voter type
	Type 1	Type 2	Type 3
Percent of electorate	35	25	40
First choice	C	A	B
Second choice	A	B	C
Third choice	B	C	A

Refer to Figure 22-1. Using a Borda count, which outcome is preferred?

Which of the following is not a property required of a perfect voting system?

Suppose that 40 per cent of the voting population wish to spend €1,000 for artwork in City Hall, 25 per cent wish to spend €20,000, and 35 per cent wish to spend €22,000. What is the median preferred outcome, the average preferred outcome, and the modal preferred outcome?

Which of the following is true under pairwise majority rule if people vote for the outcome closest to their most preferred outcome?

Which of the following is not true about how people make decisions?

In the ultimatum game, what split would be rational for both the person proposing the split and the person who must accept or reject the split?

Which of the following help explain why firms pay bonuses to workers during particularly profitable years to prevent workers from becoming disgruntled? People:

John's friend dies of a sudden heart attack. John rushes to his doctor for an expensive physical examination. This response demonstrates that people:

Which of the following is a response to people's inconsistent behaviour over time?