Chapter 22 - Frontiers of Microeconomics

Information asymmetry

________: a difference in access to knowledge.

Condorcet

________ paradox: the failure of majority rule to produce transitive preferences for society.

Transitivity

________: If A beats B, and B beats C, then A should beat C ..

Unanimity

________: If everyone prefers A to B, then A should beat B ..

Arrows impossibility theorem

________: a mathematical result showing that, under certain assumed conditions, there is no scheme for aggregating individual preferences into a valid set of social preferences.

Signals

________ must be less costly to the person with the higher- quality product.

Politicians

________ have motivations, selfish and selfless.

Consumption saving decisions

________ are examples of inconsistency.

Principal

________: a person for whom another person, called the agent, performs some act.

Agent

________: a person who performs an act for another person, called the principal.

Adverse selection

________: the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.

undesirable behavior

Moral hazard: the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise ________.

Higher wages

________ incentivize workers to work higher.

Asymmetric information

________: some people are more informed than others, affecting how they make choices and how they interact with each other.

Homo economicus

________ refers to human organisms that are always rational, which is studied in economic theory.

Political economy

________: (also known as a public choice) the study of government using the analytic methods of economics The Condorcet Voting Paradox.

Political economy

________: how markets fail and how government policy can potentially improve situations.

Asymmetric information

________________: some people are more informed than others, affecting how they make choices and how they interact with each other

Political economy

______________: how markets fail and how government policy can potentially improve situations

Behavioral economics

_____________________: how human behavior can be more subtle, complex, and realistic than the one in conventional economic theory

Moral hazard

_____________: the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior

Principal

____________: a person for whom another person, called the agent, performs some act

Agent

_________: a person who performs an act for another person, called the principal