Exam 21: Consumer Utility and Optimization

(Figure: Water vs. Soda) Refer to the figure. The figurerepresents the marginal utility Janet receives when sheconsumes bottled water and soda. The prices of bottled waterand sodas are both $1 each. Janet has $5 to spend. What mix ofbottled water and soda will maximize Janet's utility?

is true that incentives matter, and:

Which of the following individuals seems to have followed adiversification strategy? Someone who has purchased stock in:

Why would stock for a high-end store with expensive clothingbe considered risky in a recession?

An example of an extrinsic reward is a plaque thatrecognizes employee of the month.

Monetary rewards are most successful when:

A speculative bubble is:

John Stossel picked Wall Street stocks at random, and hisportfolio outperformed what proportion of expert stockbrokersand fund managers?

If the price of Good X is $10 and price of Good Y is $15, theslope of the budget constraint is -1.5.

In a market of 2,000 investors who each year flip a coin topredict market success or failure, how many investors will havebeen consistently right after five years? Assume the coin tossesyield heads exactly 50 percent of the time.

Which of the following are advantages of saving your money ina mutual fund? I. You have professional fund management II.Mutual funds have always outperformed the S&P 500 III. People with smaller amounts of money can diversify risk.

A buy-and-hold strategy only works for stocks that are veryvolatile.

During the price rise associated with a speculative bubble,capital is invested:

Asset price bubbles are:

Which of the following is TRUE of speculative bubbles in stockprices?

When sales vary for reasons having little to do withhard work, strong incentives may be more appropriaterewards for productivity.

Tournaments work best when it is hard to determineworker effort and there are random external forcesthat affect worker performance.

Which of the following individuals has a poor diversificationstrategy? Someone who buys:

proportion of U.S. corporations evaluateemployees based upon relative performance?

Historically, stocks offer __________ returns than bonds in thelong run.