Econ_198_Aut_07_Exam - Introduction to Microeconomics Economics 19800 THIRD HOUR EXAMINATION Name(Please Print Allen R Sanderson Autumn 2007[42

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1 Introduction to Microeconomics Allen R. Sanderson Economics 19800 Autumn 2007 THIRD HOUR EXAMINATION Name (Please Print): ______________________________________ [42 Points Possible] Part I. Multiple Choice. Circle letter corresponding to your answer. One point each; 21 points total. 1. Economists argue that firms making quality products have more to gain from advertising than firms with inferior products. This is because of the concept or principle of: a. asymmetric information. b. signaling. c. adverse selection. d. the short-sightedness effect. e. the market for lemons. 2. A batter in baseball to some extent has to guess as to whether the pitcher’s next delivery will be a fastball, curve, slider, split-finger, etc. In economics this is called: a. a moral hazard problem. b. a principal-agent problem. c. an adverse selection problem. d. a type I error. e. an asymmetric information problem. 3. The labor supply curve is fundamentally a representation of the tradeoff people face between: a. the income and substitution effects. b. gross wages and take-home pay once taxes have been removed. c. work and leisure. d. the reservation wage and all opportunity costs. e. hiring more workers versus using more machinery (that is, capital) in production processes. 4. Once I buy car insurance I might have less of an incentive to drive as carefully. This likely behavioral change is referred to as: a. adverse selection. b. efficient market theory. c. moral hazard. d. a random walk (or, in this particular case, a random drive). e. discounting. 5. A competitive firm will hire workers up until the point where the additional benefit they receive from the last worker hired is equal to: a. the last machine “hired.” b. the price of the good being produced. c. the firm’s average total cost. d. the wage paid to that worker. e. the marginal physical product of that worker. 6. The Ultimatum Game: a. supports the notion that fairness matters to people. b. is one way to resolve the prisoners’ dilemma, and in general a good approach to analyzing game theory behavior and strategic decision-making. . c. shows that it may not make sense for individuals to try to maximize utility, firms to maximize profits, and/or workers to maximize wages. d. reveals that most of us are shortsighted, rationally ignorant, irrational and over-confident. e. demonstrates that some people – perhaps a majority of people – have very high discount rates.
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2 7. Suppose in early January 2008 you deposit $1,000 into a savings account at a local commercial bank that pays you a 5 percent interest rate. Left untouched, when would your account balance be approximately $2,000? a.
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This test prep was uploaded on 04/07/2008 for the course ECON 198 taught by Professor Sanderson during the Spring '08 term at UChicago.

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Econ_198_Aut_07_Exam - Introduction to Microeconomics Economics 19800 THIRD HOUR EXAMINATION Name(Please Print Allen R Sanderson Autumn 2007[42

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