Question 1

In the streetlight example of a demand-revealing mechanism, the "optimal" plan is the one that ____________ the difference between the total amount the members are willing to pay for a plan and its cost.

Accepted Answer

The optimal plan in this case would be the one that maximizes the difference between the total amount the members are willing to pay and the cost of the plan. This ensures that the most value is extracted from the members while still providing the service at a cost-effective price.

Question 2

A relationship between the environment and the set of desired outcomes, which tells us which outcomes will never satisfy our performance criteria is known as

Accepted Answer

The relationship between the environment and the set of desired outcomes that tells us which outcomes will never satisfy our performance criteria is known as the performance correspondence. Therefore, option B is the correct answer. Rent-seeking behavior refers to the manipulation of the political or economic environment to achieve personal gain. The Borda count method is a voting system that determines the winner of an election based on the total number of points each candidate receives. None of these options directly relate to the relationship between the environment and the set of desired outcomes.

Question 3

What is the key assumption on which the Lindahl solution depends?

Accepted Answer

The answer of What is the key assumption on which...

Question 4

Summarize the reasons that some people feel that there is a legitimate role for government intervention.

Accepted Answer

The answer of Summarize the reasons that some people feel...

Question 5

Give some examples that support the Gibbard-Satterthwaite theorem.

Accepted Answer

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Question 6

In voting for one-dimensional issues, if a person has a uniquely best alternative she or he prefers and her or his preferences decline as the distance between this best alternative and the alternative under consideration increases, then preferences are single

Accepted Answer

Peaked preferences refer to a situation where a person's preference for an alternative increases as the alternative becomes closer to their preferred option but declines as it moves further away. This is common in one-dimensional issues where there is only one dimension on which alternatives can be ranked.

Question 7

According to the Gibbard-Satterthwaite theorem, when a single outcome is to be chosen from more than two alternatives, the only voting rule that cannot be manipulated is

Accepted Answer

The Gibbard-Satterthwaite theorem states that any non-dictatorial voting system with at least three alternatives can be manipulated by at least one voter. Therefore, the only voting rule that cannot be manipulated is a dictatorial one, where a single individual's preferences always determine the outcome. The Borda count method and the majority rule can both be manipulated by strategic voting.

Question 8

You like to play loud music at your house. One day you notice your neighbors dancing to your music. What type of good is your music?

Accepted Answer

The answer of You like to play loud music at...

Question 9

Under the conditions that lead to strategic voting, truth-telling __________ a Nash equilibrium strategy.

Accepted Answer

Under the conditions that lead to strategic voting, truth-telling is not a Nash equilibrium strategy because individuals have an incentive to deviate from truth-telling in order to strategically influence the outcome. In other words, truthful voting does not maximize an individual's expected payoff in these situations.

Question 10

A theorem that demonstrates that there is no voting mechanism that determines transitive social preferences and also satisfies the five conditions for a desirable voting mechanism is called

Accepted Answer

Arrow's impossibility theorem states that there is no voting mechanism that can satisfy all five conditions for a desirable voting mechanism and determine transitive social preferences. Therefore, option A is the correct choice. Option B is incorrect because Arrow's theorem demonstrates the impossibility of such a mechanism, rather than the possibility of one. Option C is not a known theorem.

Question 11

To break the cycling of social preferences that results from the voting paradox, society might have to rely on

Accepted Answer

The voting paradox arises due to conflicting social preferences, which cannot be resolved by individual voting decisions alone. Therefore, relying on an external authority, such as a government agency or a judiciary, may be necessary to break the cycling of social preferences and provide a stable outcome. Coasian bargaining and the Lindahl solution are alternative mechanisms for resolving social conflicts but may not be as effective in dealing with the voting paradox.

Question 12

The voting paradox holds that, even if all the people in a society have transitive preferences, the preferences of society taken as a whole

Accepted Answer

The voting paradox states that even if individuals have transitive preferences, the social preferences may not be transitive. This is because the preference order of the society as a whole may be affected by the specific method used for aggregating individual preferences. Therefore, option A is the correct answer, as the preferences of society as a whole need not be transitive.

Question 13

Which of the following is a reason for some type of government mediation in a market?

Accepted Answer

Both social conflict over appropriate levels of public goods and the need to aggregate the preferences of individuals to reach a socially desirable outcome are valid reasons for government intervention in a market. Without government intervention, the market may not be able to efficiently allocate resources, resulting in an outcome that does not maximize societal welfare.

Question 14

Rent seeking implies that the loss to society from monopolies established by the government is much greater than the deadweight loss because of all the money wasted on

Accepted Answer

Rent seeking is the act of seeking to increase one's share of existing wealth without creating new wealth. In the case of monopolies established by the government, firms may spend money on lobbying and other efforts to obtain monopolistic privileges, which creates a deadweight loss for society. This loss is compounded by the additional resources wasted on rent-seeking activities, making option B the best choice. Options A and C are not relevant to this concept.

Question 15

The moral of the agenda manipulation story is to beware of

Accepted Answer

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Question 16

Exhibit 25-1
$\begin{array}{|c|c|c|c|}
\hline & & \text { Web Site } & \
\hline \text { Student } & \mathbf{A} & \mathbf{B} & \mathbf{C} \
\hline 1 & \$ 120 & \$ 100 & \$ 80 \
\hline 2 & 60 & 140 & 100 \
\hline 3 & 40 & 160 & 50 \
\hline 4 & 80 & 40 & 180 \
\hline
\end{array}$
-A professor is trying to decide which tutorial Web site to post for an economics course. Exhibit 25-1 is a demand-revealing mechanism representing students' truthful answers about their preferences for three different sites. Which site has the highest total willingness to pay?

Accepted Answer

To calculate the total willingness to pay for each site, you need to add up the amounts in each column. The total willingness to pay for Site A is $300, for Site B it is $440, and for Site C it is $410. Therefore, Site B has the highest total willingness to pay and should be the professor's choice.

Question 17

One condition for an ideal voting mechanism is

Accepted Answer

Nondictatorship is a necessary condition for an ideal voting mechanism in order to ensure that no individual has complete control over the decision-making process. Group selfishness is not a desirable condition as it implies that individuals are only concerned with their own interests rather than the common good. Stackelberg optimality is not directly related to voting mechanisms and is instead a concept from game theory.

Question 18

The behavior of interest groups in their attempt to extract rents from the government or other authorities is called

Accepted Answer

Rent-seeking behavior refers to the actions taken by interest groups to secure economic benefits through political influence rather than through creating economic value or producing goods and services. It is a form of lobbying that seeks to extract economic benefits from the government, such as tax breaks, subsidies, protective tariffs, or regulatory advantages. This behavior can lead to inefficiencies, distortions in the economy, and a misallocation of resources.

Question 19

The auction election mechanism differs from the demand-revealing mechanism because the former requires that decisions be made

Accepted Answer

The auction election mechanism requires unanimous decisions, whereas the demand-revealing mechanism does not necessarily require unanimity and can work with decisions based on the total willingness to pay of the participants.

Question 20

What is so bad about rent seeking behavior?

Accepted Answer

The answer of What is so bad about rent seeking...

Quiz 25: Public Goods, the Consequences of Strategic Voting Behavior, and the Role of Government