Question 1

good compensation scheme:

Accepted Answer

A) ties rewards to actions that an agent does not control. 
B) ties rewards to actions that an agent controls.(True Answer )Correct 
C) will not increase performance in a poor economy. 
D) is based on luck. 
A) ties rewards to actions that an agent does not control. 
B) ties rewards to actions that an agent controls.(True Answer )Correct 
C) will not increase performance in a poor economy. 
D) is based on luck.

Question 2

Which of the following statements is TRUE?

Accepted Answer

A) In the long run, stock returns are higher than bond returns. 
B) Passive investments underperform active investments. 
C) One can earn higher returns by investing in funds with high loading costs. 
D) The efficient markets hypothesis only holds in the short run. 
A) In the long run, stock returns are higher than bond returns. 
B) Passive investments underperform active investments. 
C) One can earn higher returns by investing in funds with high loading costs. 
D) The efficient markets hypothesis only holds in the short run.

Question 3

Which of the following statements is TRUE?
I. A mutual fund pools money from many different investorsand uses that money to invest in many different firms
II.Mutual funds that are run by managers who try to pick thebest performing stocks usually outperform the S&P 500
III. Passive mutual funds do not try to select winning stocks;they mimic broader markets like the S&P 500.

Accepted Answer

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

Question 4

Since for every buyer of a stock there is a seller of that stock,someone can likely become very rich acting on publicinformation.

Accepted Answer

A) True 
 B)False

Question 5

paid programmers by the number of lines of codewritten, which resulted in:

Accepted Answer

A) too many lines of poor-quality code.(True Answer )Correct 
B) primarily high-quality code. 
C) increased profits. 
D) increased sales revenue. 
A) too many lines of poor-quality code.(True Answer )Correct 
B) primarily high-quality code. 
C) increased profits. 
D) increased sales revenue.

Question 6

(Figure: Budget Constraint) Refer to the figure. A consumerhas $45 to spend on movie and music downloads per month.What is the price per movie and music download?

Accepted Answer

A) $15 per movie download and $0.45 per music download 
B) $3 per movie download and $1 per music download (True Answer )Correct 
C) $2.50 per movie download and $1.50 per music download 
D) $10 per movie download and $0.80 per music download 
A) $15 per movie download and $0.45 per music download 
B) $3 per movie download and $1 per music download (True Answer )Correct 
C) $2.50 per movie download and $1.50 per music download 
D) $10 per movie download and $0.80 per music download

Question 7

(Table: Index Funds) Refer to the table. Which index fund would be best to include in a retirement savings plan?

Accepted Answer

A) Vanguard 500 
B) California Investment 
C) Vantagepoint 500 
D) All of these funds provide equal real returns. 
A) Vanguard 500 
B) California Investment 
C) Vantagepoint 500 
D) All of these funds provide equal real returns.

Question 8

If there are only two goods in the economy, chocolate andpeanut butter, and the price of chocolate falls, the new utilitymaximizing bundle for a typical consumer would entailconsuming ______ peanut butter and ______ chocolate.

Accepted Answer

A) less; more 
B) more; less 
C) more; more 
D) less; less 
A) less; more 
B) more; less 
C) more; more 
D) less; less

Question 9

piece rate system ________ earnings inequality.

Accepted Answer

A) has no effect on 
B) increases 
C) decreases 
D) first increases then decreases 
A) has no effect on 
B) increases 
C) decreases 
D) first increases then decreases

Question 10

"Employee of the month" plaques in fast-foodrestaurants recognize the lesson that when designingincentive schemes:

Accepted Answer

A) you get what you pay for. 
B) money isn't everything. 
C) fast-food places always pay the minimum wage. 
D) pay does not need to be tied to performance. 
A) you get what you pay for. 
B) money isn't everything. 
C) fast-food places always pay the minimum wage. 
D) pay does not need to be tied to performance.

Question 11

According to the efficient markets hypothesis, the person whomost likely earns the highest return for holding the stock ofCompany ABC on a single day is:

Accepted Answer

A) a person who follows a buy-and-hold strategy. 
B) an active trader who knows the historical prices of ABC. 
C) ABC's CEO who has inside information about the company's new projects. 
D) None of the answers is correct: No one can outperform anyone else at any time. 
A) a person who follows a buy-and-hold strategy. 
B) an active trader who knows the historical prices of ABC. 
C) ABC's CEO who has inside information about the company's new projects. 
D) None of the answers is correct: No one can outperform anyone else at any time.

Question 12

Which of the following risks increases when a badteacher is grading on a curve?

Accepted Answer

A) ability risk 
B) environmental risk 
C) incentive risk 
D) competition risk 
A) ability risk 
B) environmental risk 
C) incentive risk 
D) competition risk

Question 13

Which statement is NOT true?

Accepted Answer

A) Portfolio managers should diversify investments. 
B) The promise of higher returns is accompanied by higher risk. 
C) A single investor can consistently beat the market over the long term. 
D) Active stock markets are an important part of the economy. 
A) Portfolio managers should diversify investments. 
B) The promise of higher returns is accompanied by higher risk. 
C) A single investor can consistently beat the market over the long term. 
D) Active stock markets are an important part of the economy.

Question 14

A buy-and-hold strategy would work best for which of thefollowing people?
Someone who

Accepted Answer

A) will retire in three years 
B) is 25 years old and just started a good job (True Answer )Correct 
C) lives hand-to-mouth 
D) lives on Social Security checks 
A) will retire in three years 
B) is 25 years old and just started a good job (True Answer )Correct 
C) lives hand-to-mouth 
D) lives on Social Security checks

Question 15

(Figure: Marginal Rate of Substitution) Refer to the figure.What is the marginal rate of substitution (MRS) betweenBundle A and Bundle B?
Figure: Marginal Rate of Substitution

Accepted Answer

A) 4.5; the consumer is willing to trade 4.5 movie downloads for one music download. 
B) three; the consumer is willing to give up three movie downloads for an additional music download.(True Answer
)Correct 
C) 1.5; the consumer will buy 1.5 times as many music downloads as movie downloads. 
D) one; the consumer faces a one-to-one trade-off. 
A) 4.5; the consumer is willing to trade 4.5 movie downloads for one music download. 
B) three; the consumer is willing to give up three movie downloads for an additional music download.(True Answer
)Correct 
C) 1.5; the consumer will buy 1.5 times as many music downloads as movie downloads. 
D) one; the consumer faces a one-to-one trade-off.

Question 16

If the expected return on stocks is 10 percent, the monetaryreturn from investing in art will be less than 10 percent becausethere is a fun return to art.

Accepted Answer

A) True 
 B)False

Question 17

The efficient markets hypothesis implies that an investor:

Accepted Answer

A) cannot systematically outperform the market as a whole over time. 
B) should rely on publicly available information to outperform the market. 
C) should buy and sell lower volumes of shares. 
D) can manage a portfolio and regularly outperform the whole market. 
A) cannot systematically outperform the market as a whole over time. 
B) should rely on publicly available information to outperform the market. 
C) should buy and sell lower volumes of shares. 
D) can manage a portfolio and regularly outperform the whole market.

Question 18

Rajesh owns a pizza shop and pays his workers perpizza made. His ingredients are fresh and the recipe isgood but he has few repeat customers and his pizzas arenot tasty. He wants to redesign his incentive scheme.What would you suggest that Rajesh do?

Accepted Answer

A) pay his workers by the hour with a bonus tied to increased sales and customer satisfaction (True Answer
)Correct 
B) threaten to fire them if they do not improve the quality of the pizza 
C) continue paying the workers per pizza made 
D) provide an extra bonus based on worker productivity 
A) pay his workers by the hour with a bonus tied to increased sales and customer satisfaction (True Answer
)Correct 
B) threaten to fire them if they do not improve the quality of the pizza 
C) continue paying the workers per pizza made 
D) provide an extra bonus based on worker productivity

Question 19

riskier the payments are to workers, the:

Accepted Answer

A) more a firm must pay on average.(True Answer )Correct 
B) less a firm must pay on average. 
C) more a firm must rely on piece rate pay. 
D) fewer the workers who will take on work. 
A) more a firm must pay on average.(True Answer )Correct 
B) less a firm must pay on average. 
C) more a firm must rely on piece rate pay. 
D) fewer the workers who will take on work.

Question 20

About the only way to beat a well-functioning market and makemoney in the short run is:
I. through the efficient markets hypothesis
II.if one has insider information
III. through extreme speed and foresight.

Accepted Answer

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

good compensation scheme:

Which of the following statements is TRUE?

Since for every buyer of a stock there is a seller of that stock,someone can likely become very rich acting on publicinformation.

paid programmers by the number of lines of codewritten, which resulted in:

(Figure: Budget Constraint) Refer to the figure. A consumerhas $45 to spend on movie and music downloads per month.What is the price per movie and music download?

(Table: Index Funds) Refer to the table. Which index fund would be best to include in a retirement savings plan?

If there are only two goods in the economy, chocolate andpeanut butter, and the price of chocolate falls, the new utilitymaximizing bundle for a typical consumer would entailconsuming peanut butter and chocolate.

piece rate system ________ earnings inequality.

"Employee of the month" plaques in fast-foodrestaurants recognize the lesson that when designingincentive schemes:

According to the efficient markets hypothesis, the person whomost likely earns the highest return for holding the stock ofCompany ABC on a single day is:

Which of the following risks increases when a badteacher is grading on a curve?

Which statement is NOT true?

A buy-and-hold strategy would work best for which of thefollowing people? Someone who

(Figure: Marginal Rate of Substitution) Refer to the figure.What is the marginal rate of substitution (MRS) betweenBundle A and Bundle B? Figure: Marginal Rate of Substitution

If the expected return on stocks is 10 percent, the monetaryreturn from investing in art will be less than 10 percent becausethere is a fun return to art.

The efficient markets hypothesis implies that an investor:

Rajesh owns a pizza shop and pays his workers perpizza made. His ingredients are fresh and the recipe isgood but he has few repeat customers and his pizzas arenot tasty. He wants to redesign his incentive scheme.What would you suggest that Rajesh do?

riskier the payments are to workers, the:

About the only way to beat a well-functioning market and makemoney in the short run is: I. through the efficient markets hypothesis II.if one has insider information III. through extreme speed and foresight.

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

good compensation scheme:

Which of the following statements is TRUE?

Since for every buyer of a stock there is a seller of that stock,someone can likely become very rich acting on publicinformation.

paid programmers by the number of lines of codewritten, which resulted in:

(Figure: Budget Constraint) Refer to the figure. A consumerhas $45 to spend on movie and music downloads per month.What is the price per movie and music download?

(Table: Index Funds) Refer to the table. Which index fund would be best to include in a retirement savings plan?

If there are only two goods in the economy, chocolate andpeanut butter, and the price of chocolate falls, the new utilitymaximizing bundle for a typical consumer would entailconsuming ______ peanut butter and ______ chocolate.

piece rate system ________ earnings inequality.

"Employee of the month" plaques in fast-foodrestaurants recognize the lesson that when designingincentive schemes:

According to the efficient markets hypothesis, the person whomost likely earns the highest return for holding the stock ofCompany ABC on a single day is:

Which of the following risks increases when a badteacher is grading on a curve?

Which statement is NOT true?

A buy-and-hold strategy would work best for which of thefollowing people? Someone who

(Figure: Marginal Rate of Substitution) Refer to the figure.What is the marginal rate of substitution (MRS) betweenBundle A and Bundle B? Figure: Marginal Rate of Substitution

If the expected return on stocks is 10 percent, the monetaryreturn from investing in art will be less than 10 percent becausethere is a fun return to art.

The efficient markets hypothesis implies that an investor:

Rajesh owns a pizza shop and pays his workers perpizza made. His ingredients are fresh and the recipe isgood but he has few repeat customers and his pizzas arenot tasty. He wants to redesign his incentive scheme.What would you suggest that Rajesh do?

riskier the payments are to workers, the:

About the only way to beat a well-functioning market and makemoney in the short run is: I. through the efficient markets hypothesis II.if one has insider information III. through extreme speed and foresight.

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

If there are only two goods in the economy, chocolate andpeanut butter, and the price of chocolate falls, the new utilitymaximizing bundle for a typical consumer would entailconsuming peanut butter and chocolate.