Exam 20: Uncertainty, Risk, and Private Information

Use the following to answer question: -(Table: Choice with Uncertainty)Use Table: Choice with Uncertainty.Suppose that the probability that the sitcom does not make it to television is 30%,that it makes it to television but is not the most viewed show in its time slot is 50%,and that it makes it to television and is the most viewed show in its time slot is 20%.Given this information,Norman's expected income is:

(Multiple Choice)

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Question 121

As a result of frequent flooding,the insurance market has noted a positive correlation between flooding and the amount of insurance monies paid out for such floods.Moreover,the probability of such flooding has been increasing.As a result,homeowners in flood plains will find that flood insurance:

(Multiple Choice)

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Question 122

Through insurance and other devices,the modern economy offers many ways for individuals to reduce their exposure to risk.

(True/False)

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Question 123

(Scenario: Diversification)Use Scenario: Diversification.If Morris invests half of his money in the sunglass company and half in the rain poncho company,what is his expected gain or loss? Scenario: Diversification Morris is considering investing $10,000 in a sunglass company or a rain poncho company.If it is a rainy year and he invests only in the sunglass company,he will lose $5,000.However,if it is a rainy year and he invests only in the rain poncho company,he will earn $10,000.If it is a sunny year and he invests only in the sunglass company,he will earn $10,000;if he invests only in the rain poncho company,he will lose $5,000 in a sunny year.There is a 50% chance of a sunny year and a 50% chance of a rainy year.

(Multiple Choice)

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Question 124

The marginal utility of income for a risk-averse individual will be:

(Multiple Choice)

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Question 125

Use the following to answer question: -(Table: Choice with Uncertainty)Use Table: Choice with Uncertainty.Suppose that the probability that the sitcom does not make it to television is 30%,that it makes it to television but is not the most viewed show in its time slot is 50%,and that it makes it to television and is the most viewed show in its time slot is 20%.Given this information,Norman's expected total utility is _____ utils.

(Multiple Choice)

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Question 126

Use the following to answer question: -(Table: Income and Utility for Rahim)Use Table: Income and Utility for Rahim.Rahim's expected utility from income is _____ utils.

(Multiple Choice)

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Question 127

(Scenario: Diversification)Use Scenario: Diversification.If Morris invests all of his money in the sunglass company,what is his expected gain or loss? Scenario: Diversification Morris is considering investing $10,000 in a sunglass company or a rain poncho company.If it is a rainy year and he invests only in the sunglass company,he will lose $5,000.However,if it is a rainy year and he invests only in the rain poncho company,he will earn $10,000.If it is a sunny year and he invests only in the sunglass company,he will earn $10,000;if he invests only in the rain poncho company,he will lose $5,000 in a sunny year.There is a 50% chance of a sunny year and a 50% chance of a rainy year.

(Multiple Choice)

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Question 128

Suppose that the wealth of buyers in the insurance market falls.We would expect insurance premiums to ___ as the _ curve shifts ___.

(Multiple Choice)

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Question 129

Risk-averse individuals will always buy insurance,regardless of the premiums charged.

(True/False)

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Question 130

Use the following to answer question: -(Table: Natasha's Total Utility)Use Table: Natasha's Total Utility.Natasha earns $50,000 per year but faces losing $20,000 of it if she is late with her work.If there is a 25% probability that Natasha will be late with her work and her income will then equal $30,000,her expected income is:

(Multiple Choice)

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Question 131

Which pair of events is likely to be positively correlated?

(Multiple Choice)

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Question 132

A life insurance company will often require an applicant to submit to a brief physical exam to assess that person's basic level of health.This practice is a form of _ to lessen the problem of _.

(Multiple Choice)

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Question 133

Use the following to answer question: -(Table: Income and Utility for Rahim)Use Table: Income and Utility for Rahim.The expected value of Rahim's income is:

(Multiple Choice)

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Question 134

Which statement is TRUE if the insurance market is efficient?

(Multiple Choice)

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Question 135

Use the following to answer question: -(Table: Natasha's Total Utility)Use Table: Natasha's Total Utility.Natasha earns $50,000 per year but faces losing $20,000 of it if she is late with her work.If there is a 25% probability that Natasha will be late with her work and her income will equal $30,000,To guarantee an income of $50,000,Natasha would be willing to pay _____ for insurance.

(Multiple Choice)

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Question 136

In a particular insurance market,there is a decrease in the degree of risk aversion among buyers.Holding everything else constant,the equilibrium premium will _ and the equilibrium quantity of insurance will _.

(Multiple Choice)

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Question 137

Individuals differ in risk aversion because of:

(Multiple Choice)

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Question 138

Use the following to answer question: -(Table: Choice with Uncertainty)Use Table: Choice with Uncertainty.Suppose that the probability that the sitcom does not make it to television is 50%,that it makes it to television but is not the most viewed show in its time slot is 30%,and that it makes it to television and is the most viewed show in its time slot is 20%.Given this information,Norman,as a utility maximizer:

(Multiple Choice)

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Question 139

The problem of adverse selection:

(Multiple Choice)

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Question 140

Showing 121 - 140 of 192

As a result of frequent flooding,the insurance market has noted a positive correlation between flooding and the amount of insurance monies paid out for such floods.Moreover,the probability of such flooding has been increasing.As a result,homeowners in flood plains will find that flood insurance:

Through insurance and other devices,the modern economy offers many ways for individuals to reduce their exposure to risk.

The marginal utility of income for a risk-averse individual will be:

Use the following to answer question: -(Table: Income and Utility for Rahim)Use Table: Income and Utility for Rahim.Rahim's expected utility from income is _____ utils.

Suppose that the wealth of buyers in the insurance market falls.We would expect insurance premiums to ___ as the _ curve shifts ___.

Risk-averse individuals will always buy insurance,regardless of the premiums charged.

Which pair of events is likely to be positively correlated?

A life insurance company will often require an applicant to submit to a brief physical exam to assess that person's basic level of health.This practice is a form of _ to lessen the problem of _.

Use the following to answer question: -(Table: Income and Utility for Rahim)Use Table: Income and Utility for Rahim.The expected value of Rahim's income is:

Which statement is TRUE if the insurance market is efficient?

In a particular insurance market,there is a decrease in the degree of risk aversion among buyers.Holding everything else constant,the equilibrium premium will _ and the equilibrium quantity of insurance will _.

Individuals differ in risk aversion because of:

The problem of adverse selection:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Exam 20: Uncertainty, Risk, and Private Information

As a result of frequent flooding,the insurance market has noted a positive correlation between flooding and the amount of insurance monies paid out for such floods.Moreover,the probability of such flooding has been increasing.As a result,homeowners in flood plains will find that flood insurance:

Through insurance and other devices,the modern economy offers many ways for individuals to reduce their exposure to risk.

The marginal utility of income for a risk-averse individual will be:

Use the following to answer question: -(Table: Income and Utility for Rahim)Use Table: Income and Utility for Rahim.Rahim's expected utility from income is _____ utils.

Suppose that the wealth of buyers in the insurance market falls.We would expect insurance premiums to _____ as the _____ curve shifts _____.

Risk-averse individuals will always buy insurance,regardless of the premiums charged.

Which pair of events is likely to be positively correlated?

A life insurance company will often require an applicant to submit to a brief physical exam to assess that person's basic level of health.This practice is a form of _____ to lessen the problem of _____.

Use the following to answer question: -(Table: Income and Utility for Rahim)Use Table: Income and Utility for Rahim.The expected value of Rahim's income is:

Which statement is TRUE if the insurance market is efficient?

In a particular insurance market,there is a decrease in the degree of risk aversion among buyers.Holding everything else constant,the equilibrium premium will _____ and the equilibrium quantity of insurance will _____.

Individuals differ in risk aversion because of:

The problem of adverse selection:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Suppose that the wealth of buyers in the insurance market falls.We would expect insurance premiums to ___ as the _ curve shifts ___.

A life insurance company will often require an applicant to submit to a brief physical exam to assess that person's basic level of health.This practice is a form of _ to lessen the problem of _.

In a particular insurance market,there is a decrease in the degree of risk aversion among buyers.Holding everything else constant,the equilibrium premium will _ and the equilibrium quantity of insurance will _.