Question 1

Behavioral economics under uncertainty documents that

Accepted Answer

A)  people's behavior often differs from what standard expected utility theory predicts. 
B)  people's behavior can change with their circumstances. 
C)  people might put considerable weight on certain outcomes. 
D)  All of the above. 
A)  people's behavior often differs from what standard expected utility theory predicts. 
B)  people's behavior can change with their circumstances. 
C)  people might put considerable weight on certain outcomes. 
D)  All of the above.

Question 2

According to the reflection effect

Accepted Answer

A)  people think harder about losses than about gains. 
B)  people become more risk preferring over time. 
C)  attitudes toward risk are reversed for gains versus loses. 
D)  subjective probabilities on riskier outcomes are weighted heavier than on less risky outcomes. 
A)  people think harder about losses than about gains. 
B)  people become more risk preferring over time. 
C)  attitudes toward risk are reversed for gains versus loses. 
D)  subjective probabilities on riskier outcomes are weighted heavier than on less risky outcomes.

Question 3

If global warming began to cause random world-wide damage to crops,insurance companies

Accepted Answer

A)  would insure against specific crop failures. 
B)  would not insure against specific crop failures. 
C)  would be indifferent between insuring or not. 
D)  would find themselves facing prosecution for ignoring the problem for so long. 
A)  would insure against specific crop failures. 
B)  would not insure against specific crop failures. 
C)  would be indifferent between insuring or not. 
D)  would find themselves facing prosecution for ignoring the problem for so long.

Question 4

Politicians often highlight the plight of a single individual as a reason to support a particular project or agenda.In this case,politicians are often engaged in

Accepted Answer

A)  the Khaneman effect. 
B)  the Allais effect. 
C)  framing. 
D)  prospect theory. 
A)  the Khaneman effect. 
B)  the Allais effect. 
C)  framing. 
D)  prospect theory.

Question 5

Which of the following sets of outcomes is exhaustive?

Accepted Answer

A)  win, lose, tie 
B)  employed full-time, employed part-time, unemployed 
C)  married, single, widowed 
D)  All of the above. 
A)  win, lose, tie 
B)  employed full-time, employed part-time, unemployed 
C)  married, single, widowed 
D)  All of the above.

Question 6

Buying a diversified mutual stock fund allows you to

Accepted Answer

A)  completely avoid all types of risk. 
B)  avoid only random, unsystematic risk. 
C)  avoid only systematic risk. 
D)  avoid risk only when all the stock prices are perfectly correlated. 
A)  completely avoid all types of risk. 
B)  avoid only random, unsystematic risk. 
C)  avoid only systematic risk. 
D)  avoid risk only when all the stock prices are perfectly correlated.

Question 7

If Stock A and Stock B both decrease in value at the same time,they are

Accepted Answer

A)  negatively correlated. 
B)  uncorrelated. 
C)  positively correlated. 
D)  bad bets. 
A)  negatively correlated. 
B)  uncorrelated. 
C)  positively correlated. 
D)  bad bets.

Question 8

The ability of diversification to reduce risk

Accepted Answer

A)  is greater the more negatively correlated the two events are. 
B)  is greater the more positively correlated the two events are. 
C)  is greater the more uncorrelated the two events are. 
D)  is greater the more risk averse the individual is. 
A)  is greater the more negatively correlated the two events are. 
B)  is greater the more positively correlated the two events are. 
C)  is greater the more uncorrelated the two events are. 
D)  is greater the more risk averse the individual is.

Question 9

Bob invests $75 in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0.From this information we can conclude that Bob is

Accepted Answer

A)  risk preferring. 
B)  risk neutral. 
C)  risk averse. 
D)  irrational. 
A)  risk preferring. 
B)  risk neutral. 
C)  risk averse. 
D)  irrational.

Question 10

A risk premium

Accepted Answer

A)  is required to get a risk-neutral person to make a fair bet. 
B)  is the maximum amount needed to compensate a decision-maker to willingly take a risk. 
C)  is the maximum amount a decision-maker would pay to avoid taking a risk. 
D)  is the minimum amount a decision-maker would pay to avoid taking a risk. 
A)  is required to get a risk-neutral person to make a fair bet. 
B)  is the maximum amount needed to compensate a decision-maker to willingly take a risk. 
C)  is the maximum amount a decision-maker would pay to avoid taking a risk. 
D)  is the minimum amount a decision-maker would pay to avoid taking a risk.

Question 11

For a risk-neutral person,the expected utility associated with various levels of wealth

Accepted Answer

A)  is above the person's utility function. 
B)  is below the person's utility function. 
C)  is equal to the person's utility function. 
D)  does not exist. 
A)  is above the person's utility function. 
B)  is below the person's utility function. 
C)  is equal to the person's utility function. 
D)  does not exist.

Question 12

If two events are perfectly positively correlated,then

Accepted Answer

A)  diversification is not necessary since there is no risk. 
B)  diversification eliminates all risk. 
C)  diversification does not reduce risk at all. 
D)  diversification only cuts the risk in half. 
A)  diversification is not necessary since there is no risk. 
B)  diversification eliminates all risk. 
C)  diversification does not reduce risk at all. 
D)  diversification only cuts the risk in half.

Question 13

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.If Bob could keep $50 with certainty,his utility would be

Accepted Answer

A)  a. 
B)  b. 
C)  c. 
D)  d. 
A)  a. 
B)  b. 
C)  c. 
D)  d.

Question 14

Sarah buys little stuffed animals for $5 each.They come in different varieties.If the producer stops making (retires)a certain variety,a stuffed animal of that variety will be worth $100; otherwise it is worth $0.There is 50% chance that any variety will be retired.When Sarah buys her next stuffed animal,the expected profit is

Accepted Answer

A)  $50. 
B)  $47.50. 
C)  $45.00. 
D)  $0. 
A)  $50. 
B)  $47.50. 
C)  $45.00. 
D)  $0.

Question 15

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.Bob's expected wealth is

Accepted Answer

A)  $0. 
B)  $50. 
C)  $75. 
D)  $100. 
A)  $0. 
B)  $50. 
C)  $75. 
D)  $100.

Question 16

If Stock A sometimes increases and sometimes decreases in value when Stock B decreases in value at the same time,they are

Accepted Answer

A)  negatively correlated. 
B)  uncorrelated. 
C)  positively correlated. 
D)  random bets. 
A)  negatively correlated. 
B)  uncorrelated. 
C)  positively correlated. 
D)  random bets.

Behavioral economics under uncertainty documents that

According to the reflection effect

If global warming began to cause random world-wide damage to crops,insurance companies

Politicians often highlight the plight of a single individual as a reason to support a particular project or agenda.In this case,politicians are often engaged in

Which of the following sets of outcomes is exhaustive?

Buying a diversified mutual stock fund allows you to

If Stock A and Stock B both decrease in value at the same time,they are

The ability of diversification to reduce risk

Bob invests $75 in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0.From this information we can conclude that Bob is

A risk premium

For a risk-neutral person,the expected utility associated with various levels of wealth

If two events are perfectly positively correlated,then

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.If Bob could keep $50 with certainty,his utility would be

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.Bob's expected wealth is

If Stock A sometimes increases and sometimes decreases in value when Stock B decreases in value at the same time,they are

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Asymmetric Information

Government and Business

Global Business

Filters

Exam 14: Managerial Decision-Making Under Uncertainty

Behavioral economics under uncertainty documents that

According to the reflection effect

If global warming began to cause random world-wide damage to crops,insurance companies

Politicians often highlight the plight of a single individual as a reason to support a particular project or agenda.In this case,politicians are often engaged in

Which of the following sets of outcomes is exhaustive?

Buying a diversified mutual stock fund allows you to

If Stock A and Stock B both decrease in value at the same time,they are

The ability of diversification to reduce risk

Bob invests $75 in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0.From this information we can conclude that Bob is

A risk premium

For a risk-neutral person,the expected utility associated with various levels of wealth

If two events are perfectly positively correlated,then

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.If Bob could keep $50 with certainty,his utility would be

-The above figure shows Bob's utility function.He currently has $100 of wealth,but there is a 50% chance that it could all be stolen.Bob's expected wealth is

If Stock A sometimes increases and sometimes decreases in value when Stock B decreases in value at the same time,they are

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Asymmetric Information

Government and Business

Global Business

Filters