Filters
Question type
Study Flashcards

Figure 9-2. The figure shows a utility function for Mary Ann. Figure 9-2. The figure shows a utility function for Mary Ann. -Refer to Figure 9-2. Suppose the vertical distance between the points (0, A) and (0, B) is 5. If her wealth increased from $1,050 to $1,350, then A) Mary Ann's subjective measure of her well-being would increase by less than 5 units. B) Mary Ann's subjective measure of her well-being would increase by more than 5 units. C) Mary Ann would change from being a risk-averse person into a person who is not risk averse. D) Mary Ann would change from being a person who is not risk averse into a risk-averse person. -Refer to Figure 9-2. Suppose the vertical distance between the points (0, A) and (0, B) is 5. If her wealth increased from $1,050 to $1,350, then


A) Mary Ann's subjective measure of her well-being would increase by less than 5 units.
B) Mary Ann's subjective measure of her well-being would increase by more than 5 units.
C) Mary Ann would change from being a risk-averse person into a person who is not risk averse.
D) Mary Ann would change from being a person who is not risk averse into a risk-averse person.

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

The market for insurance is an example of diversification.

A) True
B) False

Correct Answer

verifed

verified

The sooner a payment is received and the higher the interest rate, the greater the present value of a future payment.

A) True
B) False

Correct Answer

verifed

verified

You have a bond that entitles you to a one-time payment of $10,000 one year from now. The interest rate is 10 percent per year. How much is the bond worth today?


A) $9,090.91
B) $10,000.00
C) $8,264.46
D) $9,523.81

E) C) and D)
F) B) and D)

Correct Answer

verifed

verified

Which of the following statements is correct?


A) A high-risk person is more likely to apply for insurance than a low-risk person because a high-risk person would benefit more from insurance protection.
B) A low-risk person is more likely to apply for insurance than a high-risk person because a low-risk person would benefit more from insurance protection.
C) Insurance companies can fully guard against the problem of adverse selection, but they cannot fully guard against the problem of moral hazard.
D) Insurance companies can fully guard against the problem of moral hazard, but they cannot fully guard against the problem of adverse selection.

E) B) and D)
F) None of the above

Correct Answer

verifed

verified

Which of the following games might a risk-averse person play?


A) a game where she has a 50 percent chance of winning $1 and a 50 percent chance of losing $1
B) a game where she has a 50 percent chance of winning $100 and a 50 percent chance of losing $100
C) a game where she has a 60 percent chance of winning $1 and a 40 percent chance of losing $1
D) a game where she has a 40 percent chance of winning $1 and a 60 percent chance of losing $1

E) All of the above
F) B) and D)

Correct Answer

verifed

verified

A company that produces golf clubs is considering buying some new equipment that it expects will increase future profits. If the interest rate falls the present value of these future earnings


A) rises. The company is more likely to buy the equipment.
B) rises. The company is less likely to buy the equipment.
C) falls. The company is more likely to buy the equipment.
D) falls. The company is less likely to buy the equipment.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

Figure 9-4. The figure shows a utility function for Dexter. Figure 9-4. The figure shows a utility function for Dexter. -Refer to Figure 9-4. From the appearance of the graph, we know that A) Dexter's level of satisfaction increases by more when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001. B) Dexter's level of satisfaction increases by less when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001. C) Dexter's level of satisfaction increases by the same amount when his wealth increases from $1,001 to $1,002 as it does when his wealth increases from $1,000 to $1,001. D) None of the above answers can be inferred from the appearance of the utility function. -Refer to Figure 9-4. From the appearance of the graph, we know that


A) Dexter's level of satisfaction increases by more when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001.
B) Dexter's level of satisfaction increases by less when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001.
C) Dexter's level of satisfaction increases by the same amount when his wealth increases from $1,001 to $1,002 as it does when his wealth increases from $1,000 to $1,001.
D) None of the above answers can be inferred from the appearance of the utility function.

E) B) and C)
F) All of the above

Correct Answer

verifed

verified

According to the efficient market hypothesis


A) changes in the prices of stocks are predictable. Evidence shows that managed funds typically do better than indexed funds.
B) changes in the prices of stocks are predictable. Evidence shows that indexed funds typically do better than managed funds.
C) changes in the prices of stocks are not predictable. Evidence shows that managed funds typically do better than indexed funds.
D) changes in the prices of stocks are not predictable. Evidence shows that indexed funds typically do better than managed funds.

E) All of the above
F) B) and D)

Correct Answer

verifed

verified

Two years ago Lenny put some money into an account. He earned 6 percent interest on this account and now he has about $1,000. About how much did Lenny deposit into his account two years ago?


A) about $860
B) about $870
C) about $880
D) about $890

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

A firm has three different investment options, each costing $10 million. Option A will generate $12 million in revenue at the end of one year. Option B will generate $15 million in revenue at the end of two years. Option C will generate $18 million in revenue at the end of three years. Which option should the firm choose?


A) Option A
B) Option B
C) Option C
D) The answer depends on the rate of interest, which is not specified here.

E) C) and D)
F) A) and C)

Correct Answer

verifed

verified

A risk-averse person has


A) utility and marginal utility curves that slope upward.
B) utility and marginal utility curves that slope downward.
C) a utility curve that slopes down and a marginal utility curve that slopes upward.
D) a utility curve that slopes upward and a marginal utility curve that slopes downward.

E) A) and C)
F) None of the above

Correct Answer

verifed

verified

There are many concerns for risk-averse lenders. Consider the following: 1. Lenders are concerned that borrowers with the greatest risk are the ones most likely to actively pursue loans. 2. Lenders are concerned that real GDP will decline leading to reduced corporate profits. 3. Lenders are concerned that products produced by certain corporations will become obsolete.


A) 1 is market risk; 2 is firm-specific risk
B) 2 is market risk; 3 is firm-specific risk
C) 3 is market risk; 1 is firm-specific risk
D) 2 is firm-specific risk; 3 is market risk

E) None of the above
F) B) and C)

Correct Answer

verifed

verified

James offers you $1,000 today or $X in 7 years. If the interest rate is 4.5 percent, then you would prefer to take the $1,000 today if and only if


A) X < 1,045.00.
B) X < 1,188.89.
C) X < 1,266.67.
D) X < 1,360.86.

E) A) and D)
F) A) and C)

Correct Answer

verifed

verified

According to the rule of 70, if the interest rate is 5 percent, how long will it take for the value of a savings account to double?


A) about 3.5 years
B) about 6.3 years
C) about 12 years
D) about 14 years

E) None of the above
F) All of the above

Correct Answer

verifed

verified

Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to take the $100 today if the interest rate is


A) 4 percent.
B) 5 percent.
C) 6 percent.
D) None of the above are correct.

E) C) and D)
F) B) and D)

Correct Answer

verifed

verified

What is the present value of a payment of $100 to be made one year from today?


A) $100*(1 + r)
B) $100/(1 + r)
C) $100 - $100 r
D) $100 - (1 + r) /$100

E) B) and C)
F) None of the above

Correct Answer

verifed

verified

Using the rule of 70, about how much would $100 be worth after 50 years if the interest rate were 7 percent?


A) $400
B) $800
C) $1,600
D) $3,200

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

As the number of stocks in a person's portfolio increases,


A) the risk of the portfolio increases, as indicated by the increasing value of the standard deviation of the portfolio.
B) the risk of the portfolio increases, as indicated by the decreasing value of the standard deviation of the portfolio.
C) the risk of the portfolio decreases, as indicated by the increasing value of the standard deviation of the portfolio.
D) the risk of the portfolio decreases, as indicated by the decreasing value of the standard deviation of the portfolio.

E) C) and D)
F) All of the above

Correct Answer

verifed

verified

Suppose you win a small lottery and you are given the following choice: You can receive (1) an immediate payment of $10,000 or (2) two annual payments, each in the amount of $5,200, with the first payment coming one year from now, and the second payment coming two years from now. You would choose to take the immediate payment of $10,000 if the interest rate is


A) 2 percent, but not if the interest rate is 1 percent.
B) 3 percent, but not if the interest rate is 2 percent.
C) 4 percent, but not if the interest rate is 3 percent.
D) 5 percent, but not if the interest rate is 4 percent.

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

Showing 41 - 60 of 419

Related Exams

Exam 1

Ten Principles of Economics

347 Questions

Exam 2

Thinking Like an Economist

528 Questions

Exam 3

Interdependence and the Gains From Trade

413 Questions

Exam 4

The Market Forces of Supply and Demand

568 Questions

Exam 5

Measuring a Nations Income

428 Questions

Exam 6

Measuring the Cost of Living

420 Questions

Exam 7

Production and Growth

417 Questions

Exam 8

Saving, Investment, and the Financial System

473 Questions

Exam 10

Unemployment

562 Questions

Exam 11

The Monetary System

421 Questions

Exam 12

Money Growth and Inflation

384 Questions

Exam 13

Open-Economy Macroeconomic Models

447 Questions

Exam 14

A Macroeconomic Theory of the Open Economy

375 Questions

Exam 15

Aggregate Demand and Aggregate Supply

466 Questions

Exam 16

The Influence of Monetary and Fiscal Policy on Aggregate Demand

416 Questions

Exam 17

The Short-Run Trade-Off Between Inflation and Unemployment

367 Questions

Exam 18

Six Debates Over Macroeconomic Policy

235 Questions

Show Answer