Chapter 22/Frontiers in Microeconomics ❖ 21
84. 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?
a.
Budweiser chooses to signal during the Super Bowl, while Miller Brewing Co. does not.
b.
Budweiser chooses to screen during the Super Bowl, while Miller Brewing Co. does not.
c.
Miller does not advertise during the Super Bowl because it has a superior product and the
audience already knows that.
d.
Budweiser’s advertisements during the Super Bowl are entertaining but convey no
information about the quality of its products.
85. Which of the following is an example of signaling?
a.
Graduates of highly-respected universities highlight that fact on their resumes.
b.
Magazine advertisements include the phrase “as seen on TV.”
c.
Advertisements for universities include the phrase “fully accredited.”
d.
All of the above are correct.
86. Which of the following events best exemplifies the concept of signaling?
a.
A college student’s parents, having learned that their child is short of money, send her a
check for $1,000.
b.
A woman, who is trying to win the love of a certain man, buys him a very personal gift.
c.
A grocery store maintains a policy of examining the driver’s license of everyone who
writes a personal check to purchase his groceries.
d.
A university maintains a policy of considering for admission only those students who
graduated among the top ten percent of their high school class.
87. 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
a.
screening.
b.
signaling.
c.
the seller’s curse.
d.
the principal-agent problem.
22 ❖ Chapter 22/Frontiers in Microeconomics
88. Which of the following is an example of signaling?
a.
Pat is considering the purchase of a used car. Before making the purchase he has the car
checked by an auto mechanic.
b.
Zach is applying for a new life insurance policy. Before writing the policy, the insurance
company requires Zach to be examined by a doctor.
c.
Denise is applying for a new job. Before hiring her, the firm requires Denise to take a drug
test.
d.
Marcus is planning to ask for Chaquila’s hand in marriage. Before asking her, he buys her
a box of her favorite chocolates and takes her to dinner at her favorite restaurant.
89. Screening occurs when
a.
an informed party acts to reveal his private information.
b.
an informed party acts to conceal his private information.
c.
an uninformed party acts to induce the informed party to reveal private information.
d.
one informed party acts to prevent another informed party from revealing private
information.
90. Which of the following is an example of screening?
a.
When someone is applying for a job, the employer checks references to determine the
previous work habits of the applicant.
b.
When an employee purchases group life insurance without taking a physical exam, she
knows more about her health than does the insurance company.
c.
When someone is considering buying a used car from a dealership, the seller knows the
repair history of the car but the potential buyer does not.
d.
All of the above are correct.
91. Which of the following is an example of screening?
a.
a man buys an expensive birthday present for his girlfriend
b.
an insurance company offers a policy with a high deductible
c.
the seller of a used motorcycle knows more about its true condition than a prospective
buyer
d.
society supports long prison terms for corporate criminals
Chapter 22/Frontiers in Microeconomics ❖ 23
92. A life insurance company requires new applicants to have a medical exam prior to writing the insur-
ance policy. This requirement is an example of
a.
signaling.
b.
screening.
c.
moral hazard.
d.
adverse selection.
93. An insurance company that writes automobile policies tries to separate safe drivers from risky driv-
ers by offering policies that feature different deductibles and different premiums. This practice is
best described as an example of
a.
screening.
b.
behavioral economics.
c.
the Condorcet Paradox.
d.
signaling.
94. A safe driver would likely choose an auto insurance policy with a
a.
low premium and a high deductible.
b.
high premium and a high deductible.
c.
high premium and a low deductible.
d.
high premium and no deductible.
95. An unhealthy person would likely choose a medical insurance policy with a
a.
low premium and a high deductible.
b.
high premium and a high deductible.
c.
high premium and no deductible.
d.
The unhealthy person would choose not to be insured.
96. An airline knows that business travelers have more inelastic demand for travel than vacationers.
That is, business travelers are often willing to pay more for airline tickets than vacationers. The air-
line also knows that business travelers do not like to travel over weekends. When customers request
airline tickets that do not involve travel over a weekend, the airline determines that a traveler is
likely a business traveler and charges a higher price. This is an example of
a.
moral hazard.
b.
signaling.
c.
screening.
d.
adverse selection.
24 ❖ Chapter 22/Frontiers in Microeconomics
97. Suppose that an economics department is offering a student exchange program with a university in
Giessen, Germany. If the department requires students to submit an essay in order to be considered
for the program, the essay may be an example of a(n)
a.
signal.
b.
screen.
c.
efficiency wage.
d.
principal.
98. On car insurance policies, Countrywide Insurance Company offers drivers an option: Policy 1 fea-
tures a deductible of $1,000, and it requires a driver to pay an annual premium of $500. Policy 2 fea-
tures a deductible of $250, and it requires a driver to pay an annual premium of $1,000.
a.
In offering these two policies, Countrywide is engaging in illegal price discrimination.
b.
In offering these two policies, Countrywide is screening drivers.
c.
Policy 1 is more of a burden for safe drivers than it is for risky drivers.
d.
In offering these two policies, Countrywide is signaling their quality to drivers.
POLITICAL ECONOMY
1. The field of political economy
a.
casts aside most of the standard methods of economic analysis.
b.
is also referred to as the field of public choice.
c.
is also referred to as the field of macroeconomics.
d.
produces the conclusion that democratic principles rarely lead to desirable economic
outcomes.
2. The field of political economy applies the methods of
a.
psychology to study how the economy works.
b.
political science to study how the economy works
c.
economics to study how government works.
d.
psychology to study how government works.
3. Which of the following sets of preferences can not satisfy the property of transitivity?
a.
Plan A is preferred to plan D. Plan D is preferred to plan B. Plan C is preferred to plan B.
b.
Plan A is preferred to plan B. Plan B is preferred to plan C. Plan A is preferred to plan C.
c.
Plan C is preferred to plan A. Plan B is preferred to plan A. Plan C is preferred to plan B.
d.
Plan D is preferred to plan C. Plan C is preferred to plan B. Plan B is preferred to plan D.
Chapter 22/Frontiers in Microeconomics ❖ 25
4. The Condorcet paradox
a.
demonstrates that the order in which one votes on options may influence the outcome.
b.
demonstrates that majority voting by itself may not reveal the outcome that society wants.
c.
disproves Arrow’s impossibility theorem.
d.
Both a and b are correct.
5. Suppose that residents of a town are asked to vote on the best way to improve the safety of an inter-
section. The three choices are: a stoplight, a 4-way stop, and a 2-way stop. When the mayor asks
the residents to choose between a stoplight and a 4-way stop, the residents choose a 4-way stop.
Then, when the mayor asks them to choose between a 4-way stop and a 2-way stop, they choose a 2-
way stop. However, if the mayor firsts asks the residents to choose between a 4-way stop and a 2-
way stop, they choose a 2-way stop. Then, when the mayor asks the residents to choose between a
2-way stop and a stoplight, they choose a stoplight. What does this example illustrate?
a.
Arrow’s impossibility theorem
b.
the Condorcet paradox
c.
a Borda count
d.
the median voter theorem
6. Suppose that residents of a town are asked to vote on the best day to improve the safety of an inter-
section. The three choices are: a stoplight, a 4-way stop, and a 2-way stop. The mayor asks the resi-
dents to assign 3 points to their first choice, 2 points to their second choice, and 1 point to their last
choice. The intersection will be controlled by the method that receives the most points. This voting
scheme is called
a.
Arrow’s impossibility theorem.
b.
the Condorcet paradox.
c.
a Borda count.
d.
the median voter theorem.
7. Which of the following sets of preferences satisfies the property of transitivity?
a.
Cookies are preferred to brownies. Brownies are preferred to ice cream. Ice cream is
preferred to cookies.
b.
Cookies are preferred to pie. Brownies are preferred to pie. Pie is preferred to cookies.
c.
Cookies are preferred to ice cream. Ice cream is preferred to brownies. Cookies are
preferred to brownies.
d.
Cookies are preferred to pie. Ice cream is preferred to cookies. Pie is preferred to ice
cream.
26 ❖ Chapter 22/Frontiers in Microeconomics
Table 22-1
Three friends — Tricia, Sarah, and Katie — are deciding where to go together for vacation. They all
agree that they should go to one of three places: Ireland, Italy, or Greece. They also agree that they
will have two pairwise votes to determine where to go on vacation, 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.
Tricia
Sarah
Katie
First choice
Ireland
Italy
Greece
Second choice
Italy
Greece
Ireland
Third choice
Greece
Ireland
Italy
8. Refer to Table 22-1. If the first vote pits Ireland against Italy and the second vote pits Greece
against the winner of the first vote, then the outcome is as follows:
a.
Ireland wins the first vote and Greece wins the second vote, so they go to Greece.
b.
Ireland wins the first vote and Ireland wins the second vote, so they go to Ireland.
c.
Italy wins the first vote and Italy wins the second vote, so they go to Italy.
d.
Italy wins the first vote and Greece wins the second vote, so they go to Greece.
9. Refer to Table 22-1. If the first vote pits Ireland against Greece and the second vote pits Italy
against the winner of the first vote, then the outcome is as follows:
a.
Ireland wins the first vote and Italy wins the second vote, so they go to Italy.
b.
Ireland wins the first vote and Ireland wins the second vote, so they go to Ireland.
c.
Greece wins the first vote and Greece wins the second vote, so they go to Greece.
d.
Greece wins the first vote and Italy wins the second vote, so they go to Italy.
10. Refer to Table 22-1. If the first vote pits Italy against Greece and the second vote pits Ireland
against the winner of the first vote, then the outcome is as follows:
a.
Italy wins the first vote and Ireland wins the second vote, so they go to Ireland.
b.
Italy wins the first vote and Italy wins the second vote, so they go to Italy.
c.
Greece wins the first vote and Greece wins the second vote, so they go to Greece.
d.
Greece wins the first vote and Ireland wins the second vote, so they go to Ireland.
11. Refer to Table 22-1. Depending on the order of the pairwise voting,
a.
the friends could go to either Ireland, Greece, or Italy.
b.
the friends could go to either Ireland or Greece, but they will not go to Italy.
c.
the friends could go to either Greece or Italy, but they will not go to Ireland.
d.
the friends could go to either Ireland or Italy, but they will not go to Greece.
Chapter 22/Frontiers in Microeconomics ❖ 27
12. Refer to Table 22-1. If the friends change their minds and decide to choose a vacation destination
using a Borda count, then
a.
the friends will go to Ireland.
b.
the friends will go to Italy.
c.
the friends will go to Greece.
d.
A Borda count will not result in a single winner in this case.
13. Which of the following is not correct?
a.
Pairwise voting never produces transitive preferences.
b.
The order of pairwise voting can affect the result.
c.
Majority voting by itself does not tell us what outcome a society really wants.
d.
No voting system can satisfy all of the following properties: unanimity, transitivity,
independence of irrelevant alternatives, and no dictators.
14. The field of political economy
a.
applies the methods of political science to microeconomics.
b.
applies the methods of political science to macroeconomics.
c.
is relevant to the issue of how active government should be in economic matters.
d.
integrates psychological insights to better understand individual choices.
15. Recent developments in political economy
a.
render much of the traditional field of political science obsolete.
b.
render much of the traditional field of economics obsolete.
c.
illustrate the resolute nature of democracy.
d.
point to the fact that government is a less-than-perfect institution.
16. The Condorcet voting paradox applies to situations in which voters
a.
decide between exactly two possible outcomes.
b.
decide among more than two possible outcomes.
c.
as a group have transitive preferences.
d.
choose the inferior candidate even though the majority preferred the better candidate.
28 ❖ Chapter 22/Frontiers in Microeconomics
17. The Condorcet paradox
a.
proved that the Arrow impossibility theorem is wrong.
b.
was proved wrong by the Arrow impossibility theorem.
c.
serves as an example of the Arrow impossibility theorem.
d.
pertains to voting systems, whereas Arrow’s Impossibility Theorem does not.
18. Normally, we expect voters’ preferences to exhibit a property called
a.
transitivity.
b.
transversality.
c.
normality.
d.
universality.
19. If preferences exhibit the property of transitivity, then
a.
the preferences are irrational.
b.
individuals prefer more government involvement in private markets than do people whose
preferences are not transitive.
c.
preferences change over time more quickly than when preferences are not transitive.
d.
preferences satisfy one of the properties assumed to be desirable by Kenneth Arrow in
Social Choice and Individual Values.
20. Which of the following statements captures the meaning of transitivity of preferences?
a.
If A is preferred to B, then B is less preferred than A.
b.
If A is preferred to B, and B is preferred to C, then A is preferred to C.
c.
If A is preferred to B and B is preferred to C, then the preference for A over B is stronger
than the preference for B over C.
d.
If A is preferred to C, then there exists B such that A is preferred to B and C is preferred to
A.
21. The Condorcet voting paradox demonstrates that democratic outcomes do not always obey the prop-
erty of
a.
narrowness of preferences.
b.
concavity of preferences.
c.
asymmetry of preferences.
d.
transitivity of preferences.
Chapter 22/Frontiers in Microeconomics ❖ 29
22. The Condorcet paradox shows that
a.
allocations of resources based on majority rule are always inefficient.
b.
problems in counting votes can negate legitimate democratic outcomes.
c.
the order on which things are voted can affect the result.
d.
transitive preferences are inconsistent with rationality.
23. Under majority rule, the order in which items are voted on is
a.
unimportant, and this is a lesson of the Condorcet paradox.
b.
unimportant, and this is a lesson of Arrow’s impossibility theorem.
c.
important, and this is a lesson of the Condorcet paradox.
d.
important, and this is a lesson of Arrow’s impossibility theorem.
Table 22-2
Three longtime friends-Jack, Ryan, and Colin-are deciding how they will spend their Sunday
afternoon. They all agree that they should do one of three things: go to a movie, go to the zoo, or go
to a museum. They also agree that they will have two pairwise votes to determine how to spend their
evening, 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.
Jack
Ryan
First choice
Baseball Game
Zoo
Second choice
Zoo
Movie
Third choice
Movie
Baseball Game
24. Refer to Table 22-2. If (1) the first vote pits “baseball game” against “movie,” and (2) the second
vote pits “zoo” against the winner of the first vote, then the outcome is as follows:
a.
“Baseball game” wins the first vote and “baseball game” wins the second vote, so they go
to a baseball game.
b.
“Baseball game” wins the first vote and “zoo” wins the second vote, so they go to the zoo.
c.
“Movie” wins the first vote and “movie” wins the second vote, so they go to a movie.
d.
“Movie” wins the first vote and “zoo” wins the second vote, so they go to the zoo.
25. Refer to Table 22-2. If (1) the first vote pits “baseball game” against “zoo,” and (2) the second vote
pits “movie” against the winner of the first vote, then
a.
“Baseball game” wins the first vote and “baseball game” wins the second vote, so they go
to a baseball game.
b.
“Baseball game” wins the first vote and “movie” wins the second vote, so they go to a
movie.
c.
“Zoo” wins the first vote and “zoo” wins the second vote, so they go to the zoo.
d.
“Zoo” wins the first vote and “movie” wins the second vote, so they go to a movie.
30 ❖ Chapter 22/Frontiers in Microeconomics
26. Refer to Table 22-2. Which of the following statements is correct?
a.
In a pairwise election, “movie” beats “zoo.”
b.
In a pairwise election, “zoo” beats “baseball game.”
c.
In a pairwise election, “baseball game” beats “movie.”
d.
None of the above is correct.
27. Refer to Table 22-2. Which of the following statements is correct?
a.
In a pairwise election, “zoo” beats “movie.”
b.
In a pairwise election, “baseball game” beats “zoo.”
c.
In a pairwise election, “movie” beats “baseball game.”
d.
All of the above are correct.
28. Refer to Table 22-2. Which of the following statements is correct regarding the Condorcet paradox
and the results of pairwise voting by Jack, Ryan, and Colin?
a.
The paradox implies that pairwise voting never produces transitive preferences, and so the
voting by Jack, Ryan, and Colin fails to produce transitive preferences.
b.
The paradox implies that pairwise voting sometimes (but not always) produces transitive
preferences, and the voting by Jack, Ryan, and Colin does produce transitive preferences.
c.
The paradox implies that pairwise voting sometimes (but not always) fails to produce
transitive preferences, and the voting by Jack, Ryan, and Colin fails to produce transitive
preferences.
d.
The paradox does not apply to the case at hand, because Ryan’s preferences are not
individually transitive.
29. Refer to Table 22-2. If Jack, Ryan, and Colin use a Borda count, rather than pairwise majority vot-
ing, to decide how to spend their afternoon, then they will go to
a.
a movie.
b.
the zoo.
c.
a baseball game.
d.
None of the above is correct; a Borda count fails to produce a winner in this instance.
Chapter 22/Frontiers in Microeconomics ❖ 31
Table 22-3
The citizens of Anytown will decide whether to build a new library, a new community center, or a
new ice rink. 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
Type 1
Type 2
Type 3
Percent of Electorate
25
35
40
First choice
Library
Community Center
Ice Rink
Second choice
Community Center
Ice Rink
Library
Third choice
Ice Rink
Library
Community Center
30. Refer to Table 22-3. If (1) the first vote pits “library” against “community center,” and (2) the sec-
ond vote pits “ice rink” against the winner of the first vote, then the outcome is as follows:
a.
“Library” wins the first vote and “library” wins the second vote, so they build a library.
b.
“Library” wins the first vote and “ice rink” wins the second vote, so they build an ice rink.
c.
“Community center” wins the first vote and “community center” wins the second vote, so
they build a community center.
d.
“Community center” wins the first vote and “ice rink” wins the second vote, so they build
an ice rink.
31. Refer to Table 22-3. If (1) the first vote pits “library” against “ice rink,” and (2) the second vote pits
“community center” against the winner of the first vote, then the outcome is as follows:
a.
“Library” wins the first vote and “library” wins the second vote, so they build a library.
b.
“Library” wins the first vote and “community center” wins the second vote, so they build a
community center.
c.
“Ice rink” wins the first vote and “ice rink” wins the second vote, so they build an ice rink.
d.
“Ice rink” wins the first vote and “community center” wins the second vote, so they build a
community center.
32. Refer to Table 22-3. Which of the following statements is correct?
a.
In a pairwise election, “library” beats “ice rink.”
b.
In a pairwise election, “ice rink” beats “community center.”
c.
In a pairwise election, “library” beats “community center.”
d.
All of the above are correct.
32 ❖ Chapter 22/Frontiers in Microeconomics
33. Refer to Table 22-3. Which of the following statements is correct?
a.
In a pairwise election, “ice rink” beats “library.”
b.
In a pairwise election, “library” beats “community center.”
c.
In a pairwise election, “community center” beats “ice rink.”
d.
All of the above are correct.
34. Refer to Table 22-3. Which of the following statements is correct regarding the Condorcet paradox
and the results of pairwise voting in Anytown?
a.
The paradox implies that pairwise voting never produces transitive preferences, and so the
voting in Anytown fails to produce transitive preferences.
b.
The paradox implies that pairwise voting sometimes (but not always) produces transitive
preferences, and the voting in Anytown does produce transitive preferences.
c.
The paradox implies that pairwise voting sometimes (but not always) fails to produce
transitive preferences, and the voting in Anytown fails to produce transitive preferences.
d.
The paradox does not apply to the case at hand, because the preferences of Type 3 voters
are not individually transitive.
35. Refer to Table 22-3. If the citizens of Anytown use a Borda count, rather than pairwise majority
voting, to decide what to build, then they will build a new
a.
library.
b.
community center.
c.
ice rink.
d.
None of the above is correct; a Borda count fails to produce a winner in this instance.
36. Refer to Table 22-3. If the citizens of Anytown use an instant runoff election., then they will build a
new
a.
library.
b.
community center.
c.
ice rink.
d.
None of the above is correct; an instant runoff fails to produce a winner in this instance.
Chapter 22/Frontiers in Microeconomics ❖ 33
37. As an alternative to pairwise majority voting, each voter could be asked to rank the possible out-
comes, giving 1 point to her lowest choice, 2 points to her second-lowest choice, 3 points to her
third-lowest choice, and so on. This voting method is called a(n)
a.
median vote.
b.
pairwise minority vote.
c.
Borda count.
d.
Arrow count.
38. Economist Kenneth Arrow wrote a famous book in 1951 in which he took up the question,
a.
Is there a perfect voting system?
b.
Are preferences transitive?
c.
Is a dictatorship a good form of government?
d.
Should the president of the United States be elected to a single, six-year term?
39. In his 1951 book, Social Choice and Individual Values, Kenneth Arrow defined a “perfect” voting
system. That system includes which of the following features?
a.
unanimity
b.
transitivity
c.
absence of a dictator
d.
All of the above are correct.
40. In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term “unanimity”
to mean
a.
A beats B only if everyone prefers A to B.
b.
if everyone prefers A to B, then A beats B.
c.
if A beats B and B beats C, then A must best C.
d.
everyone who is eligible to vote must vote; otherwise, the outcome is invalid.
41. In his 1951 book, Social Choice and Individual Values, Kenneth Arrow used the term “transitivity”
to mean
a.
A beats B only if everyone prefers A to B.
b.
if everyone prefers A to B, then A beats B.
c.
if A beats B and B beats C, then A must beat C.
d.
everyone who is eligible to vote must vote; otherwise, the outcome is invalid.
34 ❖ Chapter 22/Frontiers in Microeconomics
42. In his 1951 book Social Choice and Individual Values, Arrow’s perfect voting system satisfies all of
the following properties except
a.
unanimity.
b.
transitivity.
c.
reflexivity.
d.
independence of irrelevant alternatives.
43. Arrow’s impossibility theorem shows that no voting system can satisfy which of the following prop-
erties?
a.
unanimity and transitivity only
b.
transitivity and independence of irrelevant alternatives only
c.
no dictators and transitivity only
d.
unanimity, transitivity, independence of irrelevant alternatives, and no dictators
44. One property of Kenneth Arrow’s “perfect” voting system is that the ranking between any two out-
comes A and B should not depend on whether some third outcome C is also available. Arrow called
this property
a.
transitivity.
b.
pairwise perfection.
c.
independence of irrelevant alternatives.
d.
irrelevance of social choices.
45. Kenneth Arrow proved that the voting system that satisfied all of the properties of his “perfect” vot-
ing system was
a.
one in which a single person (a “dictator”) imposes his preferences on everyone else.
b.
pairwise majority voting.
c.
majority voting that is not pairwise.
d.
None of the above is correct. Arrow proved that no voting system can satisfy all of the
properties of his “perfect” system.
46. The Borda count fails to satisfy which of Kenneth Arrow’s properties of a “perfect” voting system?
a.
no dictator
b.
unanimity
c.
transitivity
d.
independence of irrelevant alternatives
Chapter 22/Frontiers in Microeconomics ❖ 35
47. The Arrow impossibility theorem shows that
a.
democracy should be abandoned as a form of government.
b.
it is impossible to improve upon democratic voting methods as a mechanism for social
choice.
c.
all voting systems are flawed as a mechanism for social choice.
d.
the median voter’s preferences will always win in a two-way vote.
48. Suppose the voters in a small country are choosing between two options, A and B. After the voting
is complete it is discovered that option A recevied 100% of the votes with option B receiving no
votes. After the vote, however, the country’s leader decides that option B is better for the people
and implements B rather than A. The voting system in this country fails which of Arrow’s proper-
ties of a desirable voting system?
a.
Unanimity
b.
Transitivity
c.
Independence of irrelevant alternatives
d.
No dictators
49. In a vote between options A, B, and C, option C wins. When option B is eliminated and a vote is
taken between option A and option C, option A wins. The voting system used fails to satisfy which
of Arrow’s properties of a desirable voting system?
a.
Unanimity
b.
Transitivity
c.
Independence of irrelevant alternatives
d.
No dictators
50. Majority rule will produce the outcome most preferred by the median voter, as demonstrated by the
a.
Arrow impossibility theorem.
b.
Condorcet paradox.
c.
pairwise voting proposition.
d.
median voter theorem.
51. When each voter has a most-preferred outcome for the expenditure on a particular government pro-
gram, majority rule will produce the outcome
a.
preferred by the mean (average) voter.
b.
preferred by the median voter.
c.
that causes the political party in power to increase its power.
d.
defined by Arrow’s Impossibility Theorem.
36 ❖ Chapter 22/Frontiers in Microeconomics
52. 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. The median voter is
a.
Voter 3.
b.
Voter 4.
c.
Voter 5.
d.
Voter 6.
53. 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 the results of the vote, the
dollars spent per person per month on garbage collection will be
a.
$10.
b.
$15.
c.
$18
d.
$20.
54. The median voter
a.
is the voter exactly in the middle of the distribution.
b.
is the voter whose preferred outcome beats any other proposal in a two-way race.
c.
always has more than half the votes on his side in a two-way race.
d.
All of the above are correct.
55. If the median voter theorem holds,
a.
a Borda count will violate the principle of transitivity.
b.
the Condorcet paradox also holds.
c.
minority views will not receive much consideration.
d.
All of the above are correct.
56. The assertion that the median voter is “king” refers directly to the result established by the
a.
Arrow impossibility theorem.
b.
Condorcet paradox.
c.
median voter theorem.
d.
Borda mechanism.
Chapter 22/Frontiers in Microeconomics ❖ 37
57. According to the median voter theorem, majority rule will
a.
always produce an inconclusive outcome.
b.
produce the outcome least preferred by the median voter.
c.
produce the outcome most preferred by the median voter.
d.
produce an outcome that is inconsistent with transitive preferences.
58. Arrow’s impossibility theorem is “disturbing” in the sense that it proves that
a.
no voting system is perfect.
b.
only a dictator can produce a desirable social outcome.
c.
the preferences of the wealthy should be given more weight than the preferences of the
poor.
d.
the centuries-old Condorcet paradox was not a paradox after all.
59. The median voter’s preferred outcome is the same as the
a.
average preferred outcome.
b.
outcome preferred by the greatest number of voters.
c.
outcome produced by majority rule.
d.
outcome preferred by Arrow’s “perfect” voter.
Scenario 22-1
At issue in a particular city vote is how much to spend, per person, on road repair next year. Among
the 10,000 voters, 1,500 prefer to spend $300 per person, but no more; 2,800 prefer to spend $450
per person, but no more; 3,500 prefer to spend $800 per person, but no more; and 2,200 prefer to
spend $1500 per person, but no more.
60. Refer to Scenario 22-1. The median voter is one who prefers to spend
a.
$300.
b.
$450.
c.
$800.
d.
$1500.
61. Refer to Scenario 22-1. If there is a vote on whether to spend $600 per person or $800 per person,
the median voter will vote to spend
a.
$600 per person and the voting outcome will be $600 per person.
b.
$600 per person and the voting outcome will be $800 per person.
c.
$800 per person and the voting outcome will be $600 per person.
d.
$800 per person and the voting outcome will be $800 per person.
38 ❖ Chapter 22/Frontiers in Microeconomics
62. Refer to Scenario 22-1. If there is a vote on whether to spend $800 per person or $1100 per person,
the median voter will vote to spend
a.
$800 per person and the voting outcome will be $800 per person.
b.
$800 per person and the voting outcome will be $1100 per person.
c.
$1100 per person and the voting outcome will be $800 per person.
d.
$1100 per person and the voting outcome will be $1100 per person.
63. An implication of the median voter theorem is that, in a race between Republicans and Democrats,
a.
if Republicans want to win, they will take a “middle-of-the-road” stance on many issues.
b.
if Democrats want to win, they will take an extreme stance on many issues.
c.
Republicans and Democrats go to extremes to differentiate themselves from one another.
d.
Republicans and Democrats work hard to identify the fringe voters.
64. When Republicans and Democrats offer similar platforms in an election campaign, a likely explana-
tion is the
a.
Arrow impossibility theorem.
b.
Condorcet paradox.
c.
median voter theorem.
d.
fact that politicians are more interested in the national interest than their own self-interest.
65. In American politics, we often observe that during a campaign, the Democratic and Republican posi-
tions on many issues are similar, which illustrates
a.
Arrow’s impossibility theorem.
b.
the Condorcet paradox.
c.
a Borda count.
d.
the median voter theorem.
66. An implication of the median voter theorem is that
a.
minority views and majority views are given equal weight.
b.
platforms of the major political parties will not differ greatly.
c.
the logic of democracy is fundamentally flawed.
d.
behavioral economics plays a significant role in voting outcomes.
Chapter 22/Frontiers in Microeconomics ❖ 39
Table 22-4
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.
Preferences
Voter 1
Voter 2
Voter 3
Voter 4
Voter 5
1st Choice
D
C
B
C
A
2nd Choice
A
B
A
D
D
3rd Choice
B
A
D
B
C
4th Choice
C
D
C
A
B
67. Refer to Table 22-4. If the vote were conducted according to a Borda count system where each per-
son’s first choice receives 4 points, second choice 3 points, third choice 2 points and fourth choice 1
point, the result would be
a.
that A would win.
b.
that B would win.
c.
that C would win.
d.
a tie between A and D.
68. Refer to Table 22-4. If the vote were conducted according to a modified Borda count system where
each person’s first choice receives 10 points, second choice 5 points, third choice 3 points and fourth
choice 1 point, the result would be that
a.
A would win.
b.
B would win.
c.
C would win.
d.
D would win.
69. Refer to Table 22-4. Which pairwise voting scheme would result in outcome B?
a.
First, choose between A and B. Second, voters choose between the winner of the first vote
and C. Third, voters choose between the winner of the second vote and D.
b.
First, choose between B and C. Second, voters choose between the winner of the first vote
and A. Third, voters choose between the winner of the second vote and D.
c.
First, choose between B and D. Second, voters choose between the winner of the first vote
and C. Third, voters choose between the winner of the second vote and A.
d.
First, choose between C and D. Second, voters choose between the winner of the first vote
and A. Third, voters choose between the winner of the second vote and B.
40 ❖ Chapter 22/Frontiers in Microeconomics
70. Refer to Table 22-4. Which pairwise voting scheme would result in outcome D?
a.
First, choose between A and B. Second, voters choose between the winner of the first vote
and C. Third, voters choose between the winner of the second vote and D.
b.
First, choose between B and D. Second, voters choose between the winner of the first vote
and C. Third, voters choose between the winner of the second vote and A.
c.
First, choose between C and D. Second, voters choose between the winner of the first vote
and A. Third, voters choose between the winner of the second vote and B.
d.
First, choose between C and D. Second, voters choose between the winner of the first vote
and B. Third, voters choose between the winner of the second vote and A.
71. Refer to Table 22-4. Which pairwise voting scheme would result in outcome A?
a.
First, choose between A and B. Second, voters choose between the winner of the first vote
and C. Third, voters choose between the winner of the second vote and D.
b.
First, choose between A and C. Second, voters choose between the winner of the first vote
and B. Third, voters choose between the winner of the second vote and D.
c.
First, choose between B and D. Second, voters choose between the winner of the first vote
and C. Third, voters choose between the winner of the second vote and A.
d.
First, choose between C and D. Second, voters choose between the winner of the first vote
and A. Third, voters choose between the winner of the second vote and B.
Table 22-5
The 500 voters of Appleton are deciding by majority rule how much to spend on a new library.
Number of voters who most prefer this amount of spending
$0
65
$1 million
60
$2 million
100
$3 million
75
$4 million
200
72. Refer to Table 22-5. The median voter prefers to spend
a.
$2 million.
b.
$2.57 million.
c.
$3 million.
d.
$4 million.