Quiz
Exam Pt. 2
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Questions in this quiz (33)
1Which decision rule works best with multistage decisions:
- Amulti-logit analysis
- Bthe two-stage technique
- Cmaximum likelihood principle
- Dthe rollback technique
- Eexpectation principle
2Which decision rule appeals to the most pessimistic decision makers
- Alaplace
- Bmaximin
- Cmaximax
- Dmaximum
- Eexpectation principle
3Which decision rule tells you to pick the outcome that minimizes profits:
- Amaximin
- Blaplace
- Cmaximum
- Dexpectation
- Enone
4Which decision rule uses the most information available:
- Alaplace
- Bmaximin
- Cmaximax
- Dmaximum likelihood
- Eexpectation principle
5________________ describes the amount of payoff someone would have to receive to be indifferent between a certain payoff and a given gamble.
- Arisk premium
- Bcertainty equivalent
- Crisk evaluation
- Daversion satisfaction
- Enone
6____________ externalities occur when important costs accrue to people other than the decision maker.
- Apositive
- Bnegative
- Cinternal
- Dfalse
- Enone
7Utility functions are usually a function of _________.
- Ahappiness
- Bmath
- Cwealth
- Deducation
- Eage
8In layman’s terms, what does it mean when we say “the utility is increasing at a decreasing rate?”
- AWhen I have less wealth, each additional dollar means less to me
- BWhen I have more wealth, each additional dollar means less to me
- CI am indifferent between less wealth and more wealth
- Dall
- Enone
9The marginal cost of adding a new server to “A Nyce Place to Work” is $3,000. The marginal benefit of the first server is $4,000, but that number drops $1000 for each additional server. How many servers should “A Nyce Place to Work” buy?
- A0
- B2
- C4
- D6
- E10
10The ______________ is the minimum benefit that must be offered to get an individual to undertake an activity.
- Acertainty equivalent
- Butility factor
- Crisk premium
- Dall
- Enone
11Judy is faced with the following decision. She can either have $20 for certain (probability = 1) or she can participate in a bet where the expected outcome is $50 with a probability of 0.5 or $0 with a probability of 0.5. Judy decides that she’s indifferent between the two options. What category of risk aversion best describes Judy?
- Arisk-averse
- Brisk-neutral
- Crisk-seeking
- Dnone
12Which of the following is true regarding the risk/reward tradeoff for individuals and for organizations?
- AOnly individuals use expected value
- BOnly organizations use expected value
- CBoth individuals and organizations use expected utility
- DBoth individuals and organizations use expected value
- EGovernmental decisions rely on expected value
13In module 4 we discussed individual decision making. What type of question asks what “the consequences are”.
I. Positive Questions
II. Normative Questions
III. Consequential Questions- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gall
14Common pitfalls (mistakes) in decision making include:
I.Ignoring Implicit Costs
II.Ignoring Sunk Costs
III.Calculating Average Rather than Marginal Benefits- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gall
15There is a great deal of debate regarding what people expect of their government. Government’s may redistribute income through which of the following:
I.Market intervention
II.Transfer payments
III.Taxation- AI
- BII
- CIII
- DI & II
- EII & III
- FI & III
- Gall
16Which of the following is one of the ways households dispose of their income?
- Apersonal taxes
- Bpersonal savings
- Cpersonal consumption expenditures
- Dall
- Enone
17Which is an advantage of a corporation?
I.Ceases to exist on death of founder(s)
II.Limited liability of ownership
III.Ability to issue debt- AI
- BII
- CIII
- DI & II
- EII & III
- FI & III
- Gall
18The “happy slave” problem noted that poverty does not seem to make people as miserable as it should. This implies what about how we should evaluate government decision making:
- AMeasures of happiness should be used exclusively
- BEconomic measures should be used exclusively
- CPoverty is not so bad
- Dall
- Enone
19According to “Balancing Liberty and the Pursuit of Well-Being” which of the following are true statements:
I.The free market fails to sufficiently protect consumers
II.The government could focus more on externalities than consumers if everyone exhibited rational behavior
III.Governments need to balance competing goals- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gall
20Which of the following causes the “invisible hand mechanism” to break down:
I. Positive Externalities
II. Pitfalls in Decision Making
III. Negative Externalities- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gall
21Which of the following is part of government’s role?
- AMaintaining stability
- BMaintaining competition
- CProvide legal structure
- Dall
- Enone
22Troy McClure is the new CEO at a NPTW, and wants to spend $3.2 B to develop the megatazer 3000, a tazer that tazes everyone in a 20 foot radius. The owners are furious, they don’t believe that this investment is in their best interests. Which term best describes the situation?
- Adecision making
- Bprinciple agent problem
- Cadverse selection
- Dmoral hazard
- Elaw of large numbers
23Governments often need to correct negative externalities. They often do this through which of the following:
I.Legislation
II.Subsidizing Consumers (i.e. low interest college loans)- AI
- BII
- Cboth
- Dneither
24Which is FALSE (NOT TRUE) regarding CAPM?
I. Only model of risk & reward
II. Reward is linked to systemic risk
III. Reward is linked to diversifiable risk- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gnone
- Hall
25Which of the following describes the efficient frontier:
I.The graphical representation of the balance between risk & reward
II.Explains the tradeoff the discount rate and opportunity cost
III.Only considers the relationship between return and systemic risk- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gall
26At what level do incentives exist:I. IndividualII.OrganizationalIII.Societal
- AI
- BII
- CIII
- Dall
27Which of the following is true regarding organizations and how the measure the risk/reward tradeoff?
I.Use an opportunity cost or cost of capital
II.Exhibit natural risk aversion
III.Discount cash flows back to present value to make decisions- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gall
28The Law of Unintended Consequences refers to the inability to predict:
- AHow biases affect decision making
- BResponses to incentive systems
- CThe study of incentive systems
- DPositive and Normative questions
- EOptimal reward amounts associated with levels of risk
29Which type of incentive would explain returning lost or stolen property:
- Afinancial
- Bmoral
- Cnatural
- Dexperience
- Enone
30A bias is a(n) __________ view of risk that _______ our decision making.
- ASubjective; alters
- BSubjective; improves
- CObjective; alters
- DAccurate; improves
- Enone
31What effect do political incentives have on the short term vs long term planning of governmental decisions?
- AEmphasize short term over long term planning
- BEmphasize long term over short term planning
- CIt is not possible to determine the effect of political incentives
- DThere is no effect on planning by political incentives
32Undertaking activities because of curiosity is best described as what type of incentive?
- Afinancial
- Bmoral
- Cnatural
- Dcoercive
- Ecommon
33Which of the following is true regarding government decision making?
I.May be the only entity able to take on certain risks
II.Often easily calculate risk and reward
III.Rarely provide incentives- AI
- BII
- CIII
- DI & II
- EI & III
- FII & III
- Gall
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- Quiz on Exam Pt. 2, created by Ashley Shields on 28/05/2021.
- Author
- Ashley Shields
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- English
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