Question 1

Technical analysis:

Accepted Answer

A) looks for patterns in stock prices. 
B) can systematically beat market averages, according to research economists. 
C) is useful for predicting when stocks will stay above certain price thresholds. 
D) All of the answers are correct. 
A) looks for patterns in stock prices. 
B) can systematically beat market averages, according to research economists. 
C) is useful for predicting when stocks will stay above certain price thresholds. 
D) All of the answers are correct. A

Question 2

The income effect is:

Accepted Answer

A) represented by a pivot in the budget constraint from a change in price. 
B) the change in consumption caused by a change in purchasing power from a price change. 
C) an increase in price caused by a change in market demand from an increase in income. 
D) the increase in the price of leisure caused by higher wages. 
A) represented by a pivot in the budget constraint from a change in price. 
B) the change in consumption caused by a change in purchasing power from a price change. 
C) an increase in price caused by a change in market demand from an increase in income. 
D) the increase in the price of leisure caused by higher wages. B

Question 3

Which of the following would create an incentive to keepbusiness meetings short?

Accepted Answer

A) Make everyone stand up at the meeting.(True Answer )Correct 
B) Make all the attendees bring their own lunch. 
C) Make everyone wear a watch. 
D) Allow only half the attendees to talk. 
A) Make everyone stand up at the meeting.(True Answer )Correct 
B) Make all the attendees bring their own lunch. 
C) Make everyone wear a watch. 
D) Allow only half the attendees to talk. A

Question 4

(Table: Mutual Funds) Refer to the table. Which mutual fundwould be best for a retirement savings plan?

Accepted Answer

A) Mutual Fund A 
B) Mutual Fund B 
C) Mutual Fund C 
D) Mutual Fund D 
A) Mutual Fund A 
B) Mutual Fund B 
C) Mutual Fund C 
D) Mutual Fund D

Question 5

If the efficient markets hypothesis is valid, then a personshould:
I. buy mutual funds
II.diversify
III. follow a buy-and-hold strategy.

Accepted Answer

A) I and II only 
B) I and III only 
C) II and III only 
D) I, II, and III 
A) I and II only 
B) I and III only 
C) II and III only 
D) I, II, and III

Question 6

The best trading strategy is to:

Accepted Answer

A) buy low and sell high. 
B) buy high and sell low. 
C) buy a couple of stocks and hold them for the long run. 
D) buy a large bundle of stocks and hold them for the long run. 
A) buy low and sell high. 
B) buy high and sell low. 
C) buy a couple of stocks and hold them for the long run. 
D) buy a large bundle of stocks and hold them for the long run.

Question 7

Which of the following is NOT a major stock index?

Accepted Answer

A) The Heathrow 2,000 
B) The Dow Jones Industrial Average 
C) The Standard and Poor's 500 
D) The NASDAQ Composite Index 
A) The Heathrow 2,000 
B) The Dow Jones Industrial Average 
C) The Standard and Poor's 500 
D) The NASDAQ Composite Index

Question 8

If a person diversifies her stock portfolio, then:

Accepted Answer

A) the expected return of her portfolio will increase. 
B) the risk of her portfolio will decrease. 
C) both the risk and expected return of her portfolio will increase. 
D) neither the risk nor the expected return of her portfolio will change. 
A) the expected return of her portfolio will increase. 
B) the risk of her portfolio will decrease. 
C) both the risk and expected return of her portfolio will increase. 
D) neither the risk nor the expected return of her portfolio will change.

Question 9

Piece rates between workers of different productivitylevels will lead to more income inequality.

Accepted Answer

A) True 
 B)False

Question 10

Most executives are compensated on the concepts oftournament theory.

Accepted Answer

A) True 
 B)False

Question 11

Amy purchased four cantaloupes at $2 each and threewatermelons at $4 each. If Amy is following the optimalconsumption rule, the marginal utility of the fourth cantaloupeand third watermelon are:

Accepted Answer

A) 12 and 24, respectively. 
B) four and three, respectively. 
C) 40 and 10, respectively. 
D) six and eight, respectively. 
A) 12 and 24, respectively. 
B) four and three, respectively. 
C) 40 and 10, respectively. 
D) six and eight, respectively.

Question 12

Executive pay based on relative performance tiescompensation more closely to the effort and ability ofthe executive than pay schemes that are tied to thefirm's stock price.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the most correct statementabout piece rates?

Accepted Answer

A) A piece rate firm would attract less productive workers because piece rates reduce the incentive to work
Hard. 
B) A piece rate firm would attract more productive workers because piece rates usually require some form
Of quality control. 
C) A piece rate firm would attract less productive workers because piece rates do not work well when
Quality is important. 
D) A piece rate firm would attract more productive workers because piece rates give productive workers a
Chance to earn more money. 
A) A piece rate firm would attract less productive workers because piece rates reduce the incentive to work
Hard. 
B) A piece rate firm would attract more productive workers because piece rates usually require some form
Of quality control. 
C) A piece rate firm would attract less productive workers because piece rates do not work well when
Quality is important. 
D) A piece rate firm would attract more productive workers because piece rates give productive workers a
Chance to earn more money.

Question 14

If your investment money is evenly divided among stocks inyour investment portfolio, which of these four stock portfolioswould suffer the most from an Adobe Systems bankruptcy?

Accepted Answer

A) Adobe Systems 
B) Adobe Systems and Best Buy 
C) Adobe Systems, Nucor, and Wyeth 
D) Adobe Systems, Ashland, Baker Hughes, Bemis, BMC Software, CA Inc., Century Telephone, Dean Foods, Dover
Corp., Eastman Kodak, EQT Corp., and Exxon
Mobil 
A) Adobe Systems 
B) Adobe Systems and Best Buy 
C) Adobe Systems, Nucor, and Wyeth 
D) Adobe Systems, Ashland, Baker Hughes, Bemis, BMC Software, CA Inc., Century Telephone, Dean Foods, Dover
Corp., Eastman Kodak, EQT Corp., and Exxon
Mobil

Question 15

On average, returns on investments in art ____________returns in the stock market.

Accepted Answer

A) exceed 
B) underperform 
C) equal 
D) cannot compare to 
A) exceed 
B) underperform 
C) equal 
D) cannot compare to

Question 16

Which of the following statements is TRUE?

Accepted Answer

A) One should avoid investing in bonds because they give lower returns than do stocks. 
B) If you need your money for something in two years, avoid putting it in stocks. 
C) Retirees should allocate more of their investments to stocks. 
D) Recent college graduates should allocate more of their money to bonds than to stocks. 
A) One should avoid investing in bonds because they give lower returns than do stocks. 
B) If you need your money for something in two years, avoid putting it in stocks. 
C) Retirees should allocate more of their investments to stocks. 
D) Recent college graduates should allocate more of their money to bonds than to stocks.

Question 17

Grading on a curve ________ environmental risk but________ ability risk.

Accepted Answer

A) increases; decreases 
B) reduces; increases 
C) eliminates; increases 
D) reduces; eliminates 
A) increases; decreases 
B) reduces; increases 
C) eliminates; increases 
D) reduces; eliminates

Question 18

way a manager can reduce an agent's risk is to tie:

Accepted Answer

A) penalties more closely to the agent's effort. 
B) bonuses more closely to the agent's sales. 
C) rewards more closely to the actions that the agent can control. 
D) pay directly to past performance. 
A) penalties more closely to the agent's effort. 
B) bonuses more closely to the agent's sales. 
C) rewards more closely to the actions that the agent can control. 
D) pay directly to past performance.

Question 19

A person purchases stocks of two companies in 2009. One hasan annual return of 2.5 percent and the other's return is 3percent. The difference between the dollar returns on the twocompany stocks would be the greatest in:

Accepted Answer

A) 2010. 
B) 2012. 
C) 2013. 
D) None of these is correct: The difference in dollar returns is always the same. 
A) 2010. 
B) 2012. 
C) 2013. 
D) None of these is correct: The difference in dollar returns is always the same.

Question 20

Over a long period of time which investment strategy istypically more profitable?

Accepted Answer

A) active 
B) passive 
C) introversive 
D) subversive 
A) active 
B) passive 
C) introversive 
D) subversive

Exam 21: Consumer Utility and Optimization

Technical analysis:

The income effect is:

Which of the following would create an incentive to keepbusiness meetings short?

(Table: Mutual Funds) Refer to the table. Which mutual fundwould be best for a retirement savings plan?

If the efficient markets hypothesis is valid, then a personshould: I. buy mutual funds II.diversify III. follow a buy-and-hold strategy.

The best trading strategy is to:

Which of the following is NOT a major stock index?

If a person diversifies her stock portfolio, then:

Piece rates between workers of different productivitylevels will lead to more income inequality.

Most executives are compensated on the concepts oftournament theory.

Amy purchased four cantaloupes at $2 each and threewatermelons at $4 each. If Amy is following the optimalconsumption rule, the marginal utility of the fourth cantaloupeand third watermelon are:

Executive pay based on relative performance tiescompensation more closely to the effort and ability ofthe executive than pay schemes that are tied to thefirm's stock price.

Which of the following is the most correct statementabout piece rates?

If your investment money is evenly divided among stocks inyour investment portfolio, which of these four stock portfolioswould suffer the most from an Adobe Systems bankruptcy?

On average, returns on investments in art ____________returns in the stock market.

Which of the following statements is TRUE?

Grading on a curve ________ environmental risk but________ ability risk.

way a manager can reduce an agent's risk is to tie:

A person purchases stocks of two companies in 2009. One hasan annual return of 2.5 percent and the other's return is 3percent. The difference between the dollar returns on the twocompany stocks would be the greatest in:

Over a long period of time which investment strategy istypically more profitable?

Welcome to Economics

Choice in a World of Scarcity

Demand and Supply

Labor and Financial Markets

Elasticity

Consumer Choices

Production, Costs, and Industry Structure

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Monopoly and Antitrust Policy

Environmental Protection and Negative Externalities

Positive Externalities and Public Goods

Labor Markets and Income

Poverty and Economic Inequality

Information, Risk, and Insurance

Financial Markets

Public Economy

International Trade

Globalization and Protectionism

Filters

Grading on a curve environmental risk but ability risk.