Question 1

stronger the incentives:

Accepted Answer

A) the less it pays to invest in careful measurement and auditing. 
B) the more it pays to invest in careful measurement and auditing. 
C) the less important the effects. 
D) the stronger the effects. 
A) the less it pays to invest in careful measurement and auditing. 
B) the more it pays to invest in careful measurement and auditing. 
C) the less important the effects. 
D) the stronger the effects.

Question 2

Tying executive compensation to stock prices may createincentives for:

Accepted Answer

A) CEOs to work harder and increase the profitability of the firm. 
B) CEOs to overstate the firm's financial status. 
C) Enron-type scandals. 
D) All of these possibilities are correct.(True Answer )Correct 
A) CEOs to work harder and increase the profitability of the firm. 
B) CEOs to overstate the firm's financial status. 
C) Enron-type scandals. 
D) All of these possibilities are correct.(True Answer )Correct

Question 3

(Figure: Indifference Curve) Refer to the figure. Which of thefollowing points generates the highest level of utility for theconsumer?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 4

(Figure: Labor Supply and Welfare) Refer to the figure. Thepresence of the welfare program causes this person to:

Accepted Answer

A) reduce hours of work from 12 to 0. 
B) increase hours of work from 0 to 12. 
C) reduce hours of work from 12 to 9. 
D) reduce hours of work from 8 to 3. 
A) reduce hours of work from 12 to 0. 
B) increase hours of work from 0 to 12. 
C) reduce hours of work from 12 to 9. 
D) reduce hours of work from 8 to 3.

Question 5

An increase in the price of a good leads to a(n) ______ in themarginal utility per dollar of that good, and thus a(n) ______ inthe quantity purchased.

Accepted Answer

A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease 
A) increase; increase 
B) increase; decrease 
C) decrease; increase 
D) decrease; decrease

Question 6

An example of an intrinsic reward is a cash bonus.

Accepted Answer

A) True 
 B)False

Question 7

Paying pizza makers for how many pizzas they make isan example of a piece rate system.

Accepted Answer

A) True 
 B)False

Question 8

Suppose an average student gets mistakenly enrolled inan honors class in high school. In the context of atournament, which of the following risks is most likely tooccur?

Accepted Answer

A) environment risk 
B) registrar risk 
C) school board risk 
D) ability risk 
A) environment risk 
B) registrar risk 
C) school board risk 
D) ability risk

Question 9

(Figure: Budget Constraint) Refer to the figure. The slope ofthe budget constraint in the figure above is equal to:

Accepted Answer

A) the price of sneakers divided by the price of flip- flops. 
B) the price of flip-flops divided by the price of gas.(True Answer )Correct 
C) the quantity of flip-flops divided by the quantity of sneakers. 
D) the quantity of sneakers divided by the quantity of flip- flops. 
A) the price of sneakers divided by the price of flip- flops. 
B) the price of flip-flops divided by the price of gas.(True Answer )Correct 
C) the quantity of flip-flops divided by the quantity of sneakers. 
D) the quantity of sneakers divided by the quantity of flip- flops.

Question 10

Grading on a curve reduces ________ but increases________.

Accepted Answer

A) environment risk; ability risk 
B) cooperation among students; environment risk 
C) ability risk; cooperation among students 
D) ability risk; environment risk 
A) environment risk; ability risk 
B) cooperation among students; environment risk 
C) ability risk; cooperation among students 
D) ability risk; environment risk

Question 11

Accepted Answer

A) $60 
B) $100 
C) $40 
D) $10 
A) $60 
B) $100 
C) $40 
D) $10

Question 12

a teacher grades on a curve, it will increase theincentive to study when:

Accepted Answer

A) ability risk equals environment risk. 
B) ability risk is high. 
C) environment risks are low. 
D) environment risks are high. 
A) ability risk equals environment risk. 
B) ability risk is high. 
C) environment risks are low. 
D) environment risks are high.

Question 13

A stock that has a high covariance with market conditions isconsidered risky because:

Accepted Answer

A) the stock belongs to a small company. 
B) the stock does not fluctuate in value. 
C) the stock moves against the market. 
D) when the market is declining, that stock will decline too. 
A) the stock belongs to a small company. 
B) the stock does not fluctuate in value. 
C) the stock moves against the market. 
D) when the market is declining, that stock will decline too.

Question 14

According to the efficient markets hypothesis, the prices oftraded assets, such as stocks and bonds, reflect all publiclytraded information.

Accepted Answer

A) True 
 B)False

Question 15

(Figure: Coffee and Comic Books) Refer to the figure. Aconsumer has $5 to spend on comic books (priced at $1 percomic book) and coffee (priced at $1 per cup). Using the figure,how many comic books and cups of coffee will this consumerpurchase?

Accepted Answer

A) three comic books and two cups of coffee 
B) two comic books and three cups of coffee (True Answer )Correct 
C) 2.5 comic books and 2.5 cups of coffee 
D) one comic book and four cups of coffee 
A) three comic books and two cups of coffee 
B) two comic books and three cups of coffee (True Answer )Correct 
C) 2.5 comic books and 2.5 cups of coffee 
D) one comic book and four cups of coffee

Question 16

A tournament system rewards workers based onabsolute not relative performance.

Accepted Answer

A) True 
 B)False

Question 17

To say that a stock price is a signal means that:

Accepted Answer

A) society can determine the value of a firm.(True Answer )Correct 
B) people transfer firm ownership via the signals. 
C) lower stock prices imply better value. 
D) speculative bubbles can be avoided. 
A) society can determine the value of a firm.(True Answer )Correct 
B) people transfer firm ownership via the signals. 
C) lower stock prices imply better value. 
D) speculative bubbles can be avoided.

Question 18

If the marginal utility of apples is 4 and marginal utility ofgrapes is 4, the consumer is maximizing utility.

Accepted Answer

A) True 
 B)False

Question 19

The benefit of a stock market to the economy is that it makessome people rich without making other people poor.

Accepted Answer

A) True 
 B)False

Question 20

Some skeptical economists say that successful brokers likeWarren Buffett are:

Accepted Answer

A) able to see the future. 
B) just lucky. 
C) incredibly smart at picking winning stocks. 
D) likely to remain successful. 
A) able to see the future. 
B) just lucky. 
C) incredibly smart at picking winning stocks. 
D) likely to remain successful.

stronger the incentives:

Tying executive compensation to stock prices may createincentives for:

(Figure: Indifference Curve) Refer to the figure. Which of thefollowing points generates the highest level of utility for theconsumer?

(Figure: Labor Supply and Welfare) Refer to the figure. Thepresence of the welfare program causes this person to:

An increase in the price of a good leads to a(n) in themarginal utility per dollar of that good, and thus a(n) inthe quantity purchased.

An example of an intrinsic reward is a cash bonus.

Paying pizza makers for how many pizzas they make isan example of a piece rate system.

Suppose an average student gets mistakenly enrolled inan honors class in high school. In the context of atournament, which of the following risks is most likely tooccur?

(Figure: Budget Constraint) Refer to the figure. The slope ofthe budget constraint in the figure above is equal to:

Grading on a curve reduces but increases.

a teacher grades on a curve, it will increase theincentive to study when:

A stock that has a high covariance with market conditions isconsidered risky because:

According to the efficient markets hypothesis, the prices oftraded assets, such as stocks and bonds, reflect all publiclytraded information.

(Figure: Coffee and Comic Books) Refer to the figure. Aconsumer has $5 to spend on comic books (priced at $1 percomic book) and coffee (priced at $1 per cup). Using the figure,how many comic books and cups of coffee will this consumerpurchase?

A tournament system rewards workers based onabsolute not relative performance.

To say that a stock price is a signal means that:

If the marginal utility of apples is 4 and marginal utility ofgrapes is 4, the consumer is maximizing utility.

The benefit of a stock market to the economy is that it makessome people rich without making other people poor.

Some skeptical economists say that successful brokers likeWarren Buffett are:

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

Exam 21: Consumer Utility and Optimization

stronger the incentives:

Tying executive compensation to stock prices may createincentives for:

(Figure: Indifference Curve) Refer to the figure. Which of thefollowing points generates the highest level of utility for theconsumer?

(Figure: Labor Supply and Welfare) Refer to the figure. Thepresence of the welfare program causes this person to:

An increase in the price of a good leads to a(n) ______ in themarginal utility per dollar of that good, and thus a(n) ______ inthe quantity purchased.

An example of an intrinsic reward is a cash bonus.

Paying pizza makers for how many pizzas they make isan example of a piece rate system.

Suppose an average student gets mistakenly enrolled inan honors class in high school. In the context of atournament, which of the following risks is most likely tooccur?

(Figure: Budget Constraint) Refer to the figure. The slope ofthe budget constraint in the figure above is equal to:

Grading on a curve reduces ________ but increases________.

a teacher grades on a curve, it will increase theincentive to study when:

A stock that has a high covariance with market conditions isconsidered risky because:

According to the efficient markets hypothesis, the prices oftraded assets, such as stocks and bonds, reflect all publiclytraded information.

(Figure: Coffee and Comic Books) Refer to the figure. Aconsumer has $5 to spend on comic books (priced at $1 percomic book) and coffee (priced at $1 per cup). Using the figure,how many comic books and cups of coffee will this consumerpurchase?

A tournament system rewards workers based onabsolute not relative performance.

To say that a stock price is a signal means that:

If the marginal utility of apples is 4 and marginal utility ofgrapes is 4, the consumer is maximizing utility.

The benefit of a stock market to the economy is that it makessome people rich without making other people poor.

Some skeptical economists say that successful brokers likeWarren Buffett are:

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

An increase in the price of a good leads to a(n) in themarginal utility per dollar of that good, and thus a(n) inthe quantity purchased.

Grading on a curve reduces but increases.