Chapter 22 - Frontiers of Microeconomics

Condorcet

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

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.

Adverse selection

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

C

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

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.

Behavioral economics

________: the subfield of economics that integrates the insights of psychology.

Political economy

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

Political economy

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