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Unformatted text preview: CHAPTER 5 Uncertainty and Consumer Behavior MULTIPLE CHOICE SECTION 5.1 Scenario 1: Aline and Sarah decide to go into business together as economic consultants. Aline believes they have a 50-50 chance of earning $200,000 a year, and that if they don't, they'll earn $0. Sarah believes they have a 75% chance of earning $100,000 and a 25% chance of earning $10,000. easy 1. Refer to Scenario 1. The expected value of the undertaking, a. according to Sarah, is $75,000. b. according to Sarah, is $100,000. c. according to Sarah, is $110,000. d. according to Aline, is $200,000. e. according to Aline, is $100,000. easy 2. Refer to Scenario 1. The probabilities discussed in the information above are a. objective because they are single numbers rather than ranges. b. objective because they have been explicitly articulated by the individuals involved. c. objective because the event hasn't happened yet. d. subjective because the event hasn't happened yet. e. subjective because they are estimates made by individuals based upon personal judgment or experience. Scenario 2: Randy and Samantha are shopping for new cars (one each). Randy expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samantha expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. easy 3. Refer to Scenario 2. Which of the following is true? a. Randy has a higher expected expense than Samantha for the car. b. Randy has a lower expected expense than Samantha for the car. c. Randy and Samantha have the same expected expense for the car, and it is somewhat less than $20,000. d. Randy and Samantha have the same expected expense for the car: $20,000. e. It is not possible to calculate the expected expense for the car until the true probabilities are known. easy 4. Refer to Scenario 2. Randy's expected expense for his car is a. $20,000. b. $19,000. c. $18,000. d. $17,500. e. $15,000. 149 CHAPTER 5 TEST BANK UNCERTAINTY AND CONSUMER BEHAVIOR SIXTH EDITION easy 5. Refer to Scenario 2. Samantha's expected expense for her car is a. $20,000. b. $19,000. c. $18,000. d. $17,500. e. $15,000. Consider the following information about job opportunities for new college graduates in Megalopolis: Table 5.1 Major Probability of Receiving an Offer In One Year Average Salary Offer Accounting 95 $25,000 Economics .90 $30,000 English .70 $24,000 Poli Sci .60 $18,000 Mathematics 1.00 $21,000 easy 6. Refer to Table 5.1. Expected income for the first year is a. highest in accounting. b. highest in mathematics. c. higher in English than in mathematics. d. higher in political science than in economics. e. highest in economics. easy 7. Refer to Table 5.1. Ranked highest to lowest in expected income, the majors are a. economics, accounting, English, mathematics, political science....
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This note was uploaded on 08/07/2011 for the course ECON 105 taught by Professor Prof.eco during the Spring '11 term at Indian School of Business.
- Spring '11