Question 1

Which of the following is an example of consumer capital?

Accepted Answer

A) education 
B) bank account balance 
C) refrigerator 
D) shares of Procter and Gamble 
A) education 
B) bank account balance 
C) refrigerator 
D) shares of Procter and Gamble

Question 2

Investment in training is called:

Accepted Answer

A) current consumption. 
B) human capital. 
C) future consumption. 
D) foregone income. 
A) current consumption. 
B) human capital. 
C) future consumption. 
D) foregone income.

Question 3

The present value of income to be received in period t is given by:

Accepted Answer

A) $It*(1 + i)t. 
B) $It/(1 + i)t. 
C) $It. 
D) $It/(1 + t)i. 
A) $It*(1 + i)t. 
B) $It/(1 + i)t. 
C) $It. 
D) $It/(1 + t)i.

Question 4

Consumer capital goods that last longer typically sell for higher prices because

Accepted Answer

A) consumers' reservation prices are higher 
B) asymmetric information leads consumers to believe they are better 
C) they have higher production costs 
D) they provide consumers with greater utility 
A) consumers' reservation prices are higher 
B) asymmetric information leads consumers to believe they are better 
C) they have higher production costs 
D) they provide consumers with greater utility

Question 5

In periods 0 and 1, Ralph consumed two goods, x1 and x2, and his utility functions in the two periods were identical. In period 0 the prices of x1 and x2 were $2 and $1 respectively, and Ralph consumed 10 units of x1 and 80 units of x2. In period 1 the prices of x1 and x2 were identical, and equal to $1. If Ralph consumed 40 units of x1 and 40 units of x2 in period 1, then the Paasche price index is:

Accepted Answer

A) 3/2. 
B) 10/9. 
C) 2/3. 
D) 9/10. 
A) 3/2. 
B) 10/9. 
C) 2/3. 
D) 9/10.

Question 6

In periods 0 and 1, Ralph consumed two goods, x1 and x2, and his utility functions in the two periods were identical. In period 0 the prices of x1 and x2 were $2 and $1 respectively, and Ralph consumed 10 units of x1 and 80 units of x2. In period 1 the prices of x1 and x2 were identical, and equal to $1. If Ralph consumed 40 units of x1 and 40 units of x2 in period 1, then the Laspeyres price index is:

Accepted Answer

A) 10/9. 
B) 2/3. 
C) 3/2. 
D) 9/10. 
A) 10/9. 
B) 2/3. 
C) 3/2. 
D) 9/10.

Question 7

If a person's marginal rate of time preference for equal amounts of consumption in the present and next periods is greater than one, she is said to be:

Accepted Answer

A) elastic. 
B) normal. 
C) impatient. 
D) patient. 
A) elastic. 
B) normal. 
C) impatient. 
D) patient.

Question 8

Dick will receive $5,000 on December 25, 2013, and $15,000 on December 25, 2014. If the yearly rate of interest is 5.0%, then the present value of these payments on December 25, 2012, is:

Accepted Answer

A) $18,367. 
B) $11,666. 
C) $6,250. 
D) $20,000. 
A) $18,367. 
B) $11,666. 
C) $6,250. 
D) $20,000.

Question 9

Which of the following is not an example of intertemporal resource allocation?

Accepted Answer

A) locating a business in one locality or another 
B) getting a job or starting a business 
C) buying a car or a corporate stock 
D) getting a job today or going to school 
A) locating a business in one locality or another 
B) getting a job or starting a business 
C) buying a car or a corporate stock 
D) getting a job today or going to school

Question 10

In periods 0 and 1, Ralph consumed two goods, x1 and x2, and his utility functions in the two periods were identical. In period 0 the prices of x1 and x2 were $2 and $1 respectively, and Ralph consumed 10 units of x1 and 80 units of x2. In period 1 the prices of x1 and x2 were identical, and equal to $1. If Ralph consumed 15 units of x1 and 65 units of x2 in period 1, then:

Accepted Answer

A) he may have been equally well off in both periods. 
B) we cannot say whether he was better off in one of the periods. 
C) he was better off in period 1. 
D) he was better off in period 0. 
A) he may have been equally well off in both periods. 
B) we cannot say whether he was better off in one of the periods. 
C) he was better off in period 1. 
D) he was better off in period 0.

Question 11

In present value calculations, the assumption of a common interest rate is:

Accepted Answer

A) convenient. 
B) essential. 
C) redundant. 
D) arbitrary. 
A) convenient. 
B) essential. 
C) redundant. 
D) arbitrary.

Question 12

The future value two years from today of $1000 received today is:

Accepted Answer

A) $1000(1 + 2r). 
B) $1000(1 - 2r). 
C) $1000(1 + r)2. 
D) $1000. 
A) $1000(1 + 2r). 
B) $1000(1 - 2r). 
C) $1000(1 + r)2. 
D) $1000.

Question 13

According to the separation theorem, individuals choose consumption expenditures over time by choosing the one with the largest:

Accepted Answer

A) unconstrained utility. 
B) constrained utility. 
C) future value. 
D) present value. 
A) unconstrained utility. 
B) constrained utility. 
C) future value. 
D) present value.

Question 14

According to Hotelling's Law, the price of a nonrenewable resource changes from one period to the next at the:

Accepted Answer

A) real growth rate of national production. 
B) nominal growth rate of national production. 
C) rate of interest. 
D) whim of its owner. 
A) real growth rate of national production. 
B) nominal growth rate of national production. 
C) rate of interest. 
D) whim of its owner.

Question 15

When the market for loanable funds is perfect, the borrowing rate is:

Accepted Answer

A) independent of the deposit rate. 
B) less than the deposit rate. 
C) greater than the deposit rate. 
D) equal to the deposit rate. 
A) independent of the deposit rate. 
B) less than the deposit rate. 
C) greater than the deposit rate. 
D) equal to the deposit rate.

Question 16

Phil owns a vacation cottage, and is considering the option of bringing electricity to the cottage. If he does, he can buy electricity for $.10 per kilowatt hour. The Public Utilities Company wants to charge Phil $2,000 for the electrical hook- up, but Phil's reservation price is only $1,500. This question concerns the measurement of the benefit to Phil for the privilege of buying electricity at
$.10 per kilowatt hour. Which of the following is true?

Accepted Answer

A) EV = $1,500 
B) CV = $2,000 
C) CS = $2,000 
D) CV = $1,500 
A) EV = $1,500 
B) CV = $2,000 
C) CS = $2,000 
D) CV = $1,500

Question 17

$1000 today is preferred to $1200 next year if the interest rate is below 10%.

Accepted Answer

A) True 
 B)False

Question 18

Powerful multinational firms:

Accepted Answer

A) care more about the numbers of items sold, not about quality products. 
B) suppress innovation because consumers are not willing to pay for very high quality goods. 
C) would never suppress quality that increases the value of the firm. 
D) suppress innovation, especially concerning built- in quality, because it would cannibalize into its own sales. 
A) care more about the numbers of items sold, not about quality products. 
B) suppress innovation because consumers are not willing to pay for very high quality goods. 
C) would never suppress quality that increases the value of the firm. 
D) suppress innovation, especially concerning built- in quality, because it would cannibalize into its own sales.

Question 19

The difference in present value between a perpetuity that promised $1 per year starting today and one that promised $1 per year starting next year is:

Accepted Answer

A) $1/(1 + i). 
B) $1. 
C) 0. 
D) $i/(1 + i). 
A) $1/(1 + i). 
B) $1. 
C) 0. 
D) $i/(1 + i).

Question 20

The present value of $1 payable in the future decreases:

Accepted Answer

A) the longer time it is to be paid and the lower r is. 
B) the longer time it is to be paid and the higher r is. 
C) the sooner it is to be paid and the lower r is. 
D) the sooner it is to be paid and the higher r is. 
A) the longer time it is to be paid and the lower r is. 
B) the longer time it is to be paid and the higher r is. 
C) the sooner it is to be paid and the lower r is. 
D) the sooner it is to be paid and the higher r is.

Which of the following is an example of consumer capital?

Investment in training is called:

The present value of income to be received in period t is given by:

Consumer capital goods that last longer typically sell for higher prices because

If a person's marginal rate of time preference for equal amounts of consumption in the present and next periods is greater than one, she is said to be:

Dick will receive $5,000 on December 25, 2013, and $15,000 on December 25, 2014. If the yearly rate of interest is 5.0%, then the present value of these payments on December 25, 2012, is:

Which of the following is not an example of intertemporal resource allocation?

In present value calculations, the assumption of a common interest rate is:

The future value two years from today of $1000 received today is:

According to the separation theorem, individuals choose consumption expenditures over time by choosing the one with the largest:

According to Hotelling's Law, the price of a nonrenewable resource changes from one period to the next at the:

When the market for loanable funds is perfect, the borrowing rate is:

$1000 today is preferred to $1200 next year if the interest rate is below 10%.

Powerful multinational firms:

The difference in present value between a perpetuity that promised $1 per year starting today and one that promised $1 per year starting next year is:

The present value of $1 payable in the future decreases:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters

Exam 5: Intertemporal Decision Making and Capital Values

Which of the following is an example of consumer capital?

Investment in training is called:

The present value of income to be received in period t is given by:

Consumer capital goods that last longer typically sell for higher prices because

If a person's marginal rate of time preference for equal amounts of consumption in the present and next periods is greater than one, she is said to be:

Dick will receive $5,000 on December 25, 2013, and $15,000 on December 25, 2014. If the yearly rate of interest is 5.0%, then the present value of these payments on December 25, 2012, is:

Which of the following is not an example of intertemporal resource allocation?

In present value calculations, the assumption of a common interest rate is:

The future value two years from today of $1000 received today is:

According to the separation theorem, individuals choose consumption expenditures over time by choosing the one with the largest:

According to Hotelling's Law, the price of a nonrenewable resource changes from one period to the next at the:

When the market for loanable funds is perfect, the borrowing rate is:

$1000 today is preferred to $1200 next year if the interest rate is below 10%.

Powerful multinational firms:

The difference in present value between a perpetuity that promised $1 per year starting today and one that promised $1 per year starting next year is:

The present value of $1 payable in the future decreases:

Microeconomics: a Working Methodology

A Theory of Preferences

Demand Theory

More Demand Theory

Production Cost: One Variable Input

Production Cost: Many Variable Inputs

The Theory of Perfect Competition

Applications of the Competitive Model

Monopoly

Input Markets and the Allocation of Resources

Labour Market Applications

Competitive General Equilibrium

Price Discrimination Monopoly Practices

Introduction to Game Theory

Game Theory and Oligopoly

Choice Making Under Uncertainty

Assymmetric Information, the Rules of the Game, and Externalities

The Theory of the Firm

Assymetric Information and Market Behaviour

Filters