W11_MT1_A(2)

# W11_MT1_A(2) - Econ 100B (Grossman)Winter 2011 Midterm...

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Econ 100B (Grossman)—Winter 2011 Midterm 1—Version A January 25, 2010 Instructions: This is a closed-book, closed-notes exam. No calculators or electronic devices are allowed. Please turn oﬀ and put away all phones and other electronic devices. There are 8 multiple-choice questions and two free-response questions. Answer as many as you can in the time allowed. I do not expect everyone to be able to answer all questions. If you get stuck on something, I suggest moving on and coming back later when/if you have time. If you have a question, please raise your hand. Good luck! Multiple choice – 25 out of 50 pts. (8 qns., 3 pts. each + 1) Answer these questions on your Scantron. Your score will only be based on the marks on your Scantron. You will not receive any credit for anything written on your exam paper. You will receive 1 extra point for correctly writing your name, perm number, version (A,B,C, or D), and TA’s name on your Scantron. Exams without the version marked will be assigned the average score for all four versions. 1. Bob has \$16, with preferences over consumption deﬁned by u ( c ) = c . Which of the following would he prefer? (a) pay \$15 for a 50% chance of winning \$80 (b) pay \$7 for a 50% chance of winning \$27 (c) pay \$15 for a 10% chance of winning \$99 (d) do nothing 2. Walther owns a home in ﬂood-prone Paradise Basin. If there is no ﬂood the home and land together will be worth \$2400. If there is a ﬂood, Walthers home will be destroyed but the land will still be worth \$900. Walther can buy ﬂood insurance for \$0.25 per dollar of coverage. Let C F and C NF be the value of respective values of his land in the case of a ﬂood or no ﬂood. Which of the following equations

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## This note was uploaded on 05/08/2011 for the course ECON 100B taught by Professor Kilenthong during the Spring '08 term at UCSB.

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W11_MT1_A(2) - Econ 100B (Grossman)Winter 2011 Midterm...

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