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201-tutorial-7

# 201-tutorial-7 - Econ 201 Tutorial#7 Date Week of Nov 1-7...

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Econ 201 Tutorial #7 Date: Week of Nov. 1-7, 2010 Coverage: Chapter 7 Firms, Investors and Capital Markets Part I: Multiple Choice Questions 1. Dave is risk averse while Scott is risk neutral. Both are confronted with the following gamble: win \$5,000 with the probability of 65% or lose \$9,000 with a probability of 35%. One can predict that: a. both will accept the gamble. b. only Scott will accept the gamble. c. only Dave will accept the gamble. d. Scott will accept and Dave may accept. 2. For the following gamble, with a probability of 20% that one wins \$100 and an 80% probability of losing \$25, Regis takes the gamble and Bryan rejects it. One can infer that: a. both Regis and Bryan are risk averse. b. neither Regis nor Bryan are risk averse. c. Regis is risk averse and Bryan is risk neutral. d. Bryan is risk averse and Regis is risk neutral.

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201-tutorial-7 - Econ 201 Tutorial#7 Date Week of Nov 1-7...

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