The Arrow Impossibility Theorem

question 92

Multiple Choice

The Arrow impossibility theorem

• A)explains why people can be rational as well as ignorant at the same time.
• B)explains why voting systems do not consistently represent the preferences of voters.
• C)explains why candidates for public office must represent the preferences of the political middle.
• D)explains why it is impossible, in most cases, to eliminate special-interest legislation after it has become law.

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Definitions:

Substitution Effect

The economic principle that as prices rise or incomes decrease, consumers will replace more expensive items with less costly alternatives.

Real Wages

Real wages refer to the purchasing power of wages, taking into account inflation, showing the quantity of goods and services that can be bought.

Legal Minimum Wage

The lowest hourly, daily, or monthly remuneration that employers are legally allowed to pay workers.

Equilibrium Wage Rate

The wage rate at which the quantity of labor supplied is equal to the quantity of labor demanded in the market.