Question 1

closer "what you pay for" is to "what you want,"then the more you can rely on strong incentives.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the price of apples rises making oranges relatively lessexpensive. The increase in orange consumption as a result ofthe price change is an example of the income effect.

Accepted Answer

A) True 
 B)False

Question 3

Indifference curves can never cross.

Accepted Answer

A) True 
 B)False

Question 4

The NASDAQ:

Accepted Answer

A) weights individual stocks equally. 
B) gives greater weight to larger stocks than does the Dow. 
C) gives greater weight to high-tech stocks than does the Dow. 
D) has 30 stocks. 
A) weights individual stocks equally. 
B) gives greater weight to larger stocks than does the Dow. 
C) gives greater weight to high-tech stocks than does the Dow. 
D) has 30 stocks.

Question 5

a teacher grades on a curve, it increases theincentive to study, particularly when:

Accepted Answer

A) students are of very different abilities. 
B) students are of similar abilities. 
C) the teacher is bad. 
D) the teacher is good. 
A) students are of very different abilities. 
B) students are of similar abilities. 
C) the teacher is bad. 
D) the teacher is good.

Question 6

the owner of a firm sells "recession insurance" toher employees, it means that the:

Accepted Answer

A) employees sacrifice larger bonuses during good economic times in return for higher salaries during bad
Economic times. 
B) owner of the firm earns higher profits during bad economic times by skimming off the workers'
Salaries. 
C) employees are not allowed to quit the firm for higher pay during good economic times. 
D) employees are not allowed to quit the firm during bad economic times. 
A) employees sacrifice larger bonuses during good economic times in return for higher salaries during bad
Economic times. 
B) owner of the firm earns higher profits during bad economic times by skimming off the workers'
Salaries. 
C) employees are not allowed to quit the firm for higher pay during good economic times. 
D) employees are not allowed to quit the firm during bad economic times.

Question 7

Well-structured tournaments not only encouragecompetition but also:

Accepted Answer

A) encourage cooperation. 
B) discourage cooperation. 
C) encourage shirking. 
D) discourage participation. 
A) encourage cooperation. 
B) discourage cooperation. 
C) encourage shirking. 
D) discourage participation.

Question 8

Tournaments can tie rewards more closely to actionsthat an agent controls thereby:

Accepted Answer

A) increasing effort and risk. 
B) reducing shirk and slack. 
C) improving productivity and pay.(True Answer )Correct 
D) All of the answers are correct. 
A) increasing effort and risk. 
B) reducing shirk and slack. 
C) improving productivity and pay.(True Answer )Correct 
D) All of the answers are correct.

Question 9

Which of the following are helpful in stock investmentstrategies?

Accepted Answer

A) buying undervalued stocks 
B) holding stocks for a long period of time 
C) lucky picks 
D) All of the answers are correct. 
A) buying undervalued stocks 
B) holding stocks for a long period of time 
C) lucky picks 
D) All of the answers are correct.

Question 10

There is evidence that wrong incentives in educationhave led to cheating by teachers.

Accepted Answer

A) True 
 B)False

Question 11

If a stock market bubble bursts:

Accepted Answer

A) aggregate demand in the economy decreases.(True Answer )Correct 
B) aggregate demand in the economy increases. 
C) aggregate supply in the economy decreases. 
D) aggregate supply and demand in the economy decrease. 
A) aggregate demand in the economy decreases.(True Answer )Correct 
B) aggregate demand in the economy increases. 
C) aggregate supply in the economy decreases. 
D) aggregate supply and demand in the economy decrease.

Question 12

One of the problems with investment advice that claims youshould buy stock in a certain company or sector of the economyis that:

Accepted Answer

A) no one else knows such advice. 
B) asset prices likely reflect that information already.(True Answer )Correct 
C) investment advice is not regulated. 
D) sellers know less than buyers in the financial markets. 
A) no one else knows such advice. 
B) asset prices likely reflect that information already.(True Answer )Correct 
C) investment advice is not regulated. 
D) sellers know less than buyers in the financial markets.

Question 13

Diversification:

Accepted Answer

A) increases risk and return. 
B) decreases risk and return. 
C) increases risk. 
D) decreases risk. 
A) increases risk and return. 
B) decreases risk and return. 
C) increases risk. 
D) decreases risk.

Question 14

Economists call a compensation scheme in which pay isbased on relative performance a:

Accepted Answer

A) profit sharing plan. 
B) bonus plan. 
C) salary. 
D) tournament. 
A) profit sharing plan. 
B) bonus plan. 
C) salary. 
D) tournament.

Question 15

Why does it make sense to avoid paying high fees wheninvesting with mutual funds or stock brokers?

Accepted Answer

A) The funds with high fees are too expensive. 
B) The funds with high fees likely hire managers who are not experts. 
C) The funds with high fees do not perform any better than other funds. 
D) It does make sense, since you should pay high fees to get access to experts. 
A) The funds with high fees are too expensive. 
B) The funds with high fees likely hire managers who are not experts. 
C) The funds with high fees do not perform any better than other funds. 
D) It does make sense, since you should pay high fees to get access to experts.

Question 16

sales depend heavily on outside factors such as thestate of the economy, strong incentives may:

Accepted Answer

A) be more expensive than they are worth.(True Answer )Correct 
B) be less expensive than they are worth. 
C) equal what they are worth. 
D) be worthless. 
A) be more expensive than they are worth.(True Answer )Correct 
B) be less expensive than they are worth. 
C) equal what they are worth. 
D) be worthless.

Question 17

By assuming diminishing marginal utility, we mean that:

Accepted Answer

A) consumers get less overall value from goods as their income rises. 
B) consumers value some goods more than others. 
C) the cost of producing goods declines as output increases. 
D) consumers value additional units of a good less than the previous unit. 
A) consumers get less overall value from goods as their income rises. 
B) consumers value some goods more than others. 
C) the cost of producing goods declines as output increases. 
D) consumers value additional units of a good less than the previous unit.

Question 18

Figure: Coffee and Comic Books   (Figure: Coffee and Comic Books) Refer to the figure. Theprice of comic books is $0.50. Using the diagram, the marginalutility per dollar for the third comic book is:

Accepted Answer

A) 11. 
B) 5.5. 
C) 22. 
D) 11.5. 
A) 11. 
B) 5.5. 
C) 22. 
D) 11.5.

Question 19

Stockbrokers make _____ commissions the _____ their clientsbuy and sell stocks.

Accepted Answer

A) lower; more frequently 
B) higher; more frequently 
C) higher; less frequently 
D) zero; more frequently 
A) lower; more frequently 
B) higher; more frequently 
C) higher; less frequently 
D) zero; more frequently

Question 20

piece rate is:

Accepted Answer

A) the discounted present value of a day's worth of production output. 
B) an hourly rate paid to mid-level managers. 
C) a method to compensate workers for the number of units of output they produce. 
D) the interest rate paid to finance a firm's output costs. 
A) the discounted present value of a day's worth of production output. 
B) an hourly rate paid to mid-level managers. 
C) a method to compensate workers for the number of units of output they produce. 
D) the interest rate paid to finance a firm's output costs.

Exam 21: Consumer Utility and Optimization

closer "what you pay for" is to "what you want,"then the more you can rely on strong incentives.

Suppose the price of apples rises making oranges relatively lessexpensive. The increase in orange consumption as a result ofthe price change is an example of the income effect.

Indifference curves can never cross.

The NASDAQ:

a teacher grades on a curve, it increases theincentive to study, particularly when:

the owner of a firm sells "recession insurance" toher employees, it means that the:

Well-structured tournaments not only encouragecompetition but also:

Tournaments can tie rewards more closely to actionsthat an agent controls thereby:

Which of the following are helpful in stock investmentstrategies?

There is evidence that wrong incentives in educationhave led to cheating by teachers.

If a stock market bubble bursts:

One of the problems with investment advice that claims youshould buy stock in a certain company or sector of the economyis that:

Diversification:

Economists call a compensation scheme in which pay isbased on relative performance a:

Why does it make sense to avoid paying high fees wheninvesting with mutual funds or stock brokers?

sales depend heavily on outside factors such as thestate of the economy, strong incentives may:

By assuming diminishing marginal utility, we mean that:

Figure: Coffee and Comic Books (Figure: Coffee and Comic Books) Refer to the figure. Theprice of comic books is $0.50. Using the diagram, the marginalutility per dollar for the third comic book is:

Stockbrokers make _____ commissions the _____ their clientsbuy and sell stocks.

piece rate is:

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

Stockbrokers make _ commissions the _ their clientsbuy and sell stocks.