RMI 2303 NYCE FSU TEST 1 QUESTIONS AND
CORRECT ANSWERS NEWEST
What is the impact of political incentives on the discount rate to be used in making
governmental decisions? - ANSWER Increase in the discount rate
Normative Questions ask what "should" be. (True or False) - ANSWER True
Callie is a supervisor at a firm, and wants to spend $1.2 million on a new building. The
owners are furious, they don't believe they need a new building. Which term best
describes the situation? - ANSWER Principal- agent problem
What is the best measure of risk? - ANSWER Standard deviation
Which of the following sources of risk is the possibility of an organization being sued
because of a product injuring a customer? - ANSWER Liability
Which category of risk does the likelihood of an earthquake represent? - ANSWER Static
The claim that decisions are made to maximize expected utility rather than expected
monetary value is the major component of what? - ANSWER utility theory
According to "Thinking Like An Economist", what is the difference between a normative
and a positive question? - ANSWER Normative questions ask about what policies or
institutional arrangements lead to the best outcome. positive questions ask what the
consequences of specific policies are.
From the excerpt of "The Wealth of Nations" how is the invisible hand developed? -
ANSWER from producers regard of their own self-interest
,When does the invisible hand mechanism break down? - ANSWER when costs of
benefits accrue to people other than the decision-maker.
Sharon is given two options. Option 1 allows her to take $5. Option 2 allows her a 1/3
chance of winning $50, but she risks losing $10, 2/3 of the time. Sharon chooses option
1. What best describes Sharon? - ANSWER Risk-averse
Economic analysis is on firmer ground in attempting to answer what variety of question
and why? - ANSWER Positive question; economic analysis questions what the
consequences of particular policies or institutional arrangements will be
sequence of steps of the decision making process? - ANSWER identify the outcomes,
identify the courses of action, determine the pay-off function and then choose from the
alternatives
which is a common pitfall of decision- making? - ANSWER failing to ignore sunk costs,
measuring costs and benefits as proportions,
A girl is given $15 by her parents. She has two options of how to spend the money. She
can either save the money for future purchases or she can start a lemonade stand on
her driveway. If she spends her $15 on the lemonade stand, there is a 50% chance she
will lose $10 and a 50% chance she will gain $12. Suppose the girl has a square root
utility function. What should she do with the money? - ANSWER save her money
The Florida Lottery has done extensive research on the people who buy their products.
They've found that their customers have a square root utility function and an initial
wealth of $100. It takes $19 to buy a lottery ticket and each lottery ticket has a 50/50
chance of being worth $39. True or False, customers will buy these lottery tickets. -
ANSWER False
What are the two reasons describing why people save? - ANSWER security and
speculation
Goods provided by the government that fit the definition of a public good, but can be
, delivered in such a way that exclusion is possible are called what? - ANSWER Quasi-
public goods
How can positive externalities be correct? - ANSWER subsidizing consumers,
subsidizing suppliers, allowing the government to provide goods
True the free market does not look after consumers' interests.
Which, according to "Balancing Liberty and the Pursuit of Well-Being", the author
criticizes more than once? Libertarianism
What is the most common from of ownership in the US? sole proprietorship
According to "The US Economy: Private and Public Sectors" What fraction of its income
does a typical householders save? 3%
Molly goes to the grocery store and spends $75 on food. Based on the reading "The US
Economy: Private and Public Sectors", which of the following best characterizes her
purchase? - ANSWER non-durable goods
Based on the reading "The US Economy: Private and Public Sectors", what do taxes that
are based on wages and salaries are called? - ANSWER Payroll taxes
What is the term that describes how a monody controls an industry? - ANSWER Supple
What is the definition of risk on an individual level? -ANSWER uncertainty regarding loss
What is the definition of risk on an organizational level? -ANSWER uncertainty regarding
loss and things that prevent the organization from reaching their objectives. it adversely
affects the achievements of an organization;s objectives
CORRECT ANSWERS NEWEST
What is the impact of political incentives on the discount rate to be used in making
governmental decisions? - ANSWER Increase in the discount rate
Normative Questions ask what "should" be. (True or False) - ANSWER True
Callie is a supervisor at a firm, and wants to spend $1.2 million on a new building. The
owners are furious, they don't believe they need a new building. Which term best
describes the situation? - ANSWER Principal- agent problem
What is the best measure of risk? - ANSWER Standard deviation
Which of the following sources of risk is the possibility of an organization being sued
because of a product injuring a customer? - ANSWER Liability
Which category of risk does the likelihood of an earthquake represent? - ANSWER Static
The claim that decisions are made to maximize expected utility rather than expected
monetary value is the major component of what? - ANSWER utility theory
According to "Thinking Like An Economist", what is the difference between a normative
and a positive question? - ANSWER Normative questions ask about what policies or
institutional arrangements lead to the best outcome. positive questions ask what the
consequences of specific policies are.
From the excerpt of "The Wealth of Nations" how is the invisible hand developed? -
ANSWER from producers regard of their own self-interest
,When does the invisible hand mechanism break down? - ANSWER when costs of
benefits accrue to people other than the decision-maker.
Sharon is given two options. Option 1 allows her to take $5. Option 2 allows her a 1/3
chance of winning $50, but she risks losing $10, 2/3 of the time. Sharon chooses option
1. What best describes Sharon? - ANSWER Risk-averse
Economic analysis is on firmer ground in attempting to answer what variety of question
and why? - ANSWER Positive question; economic analysis questions what the
consequences of particular policies or institutional arrangements will be
sequence of steps of the decision making process? - ANSWER identify the outcomes,
identify the courses of action, determine the pay-off function and then choose from the
alternatives
which is a common pitfall of decision- making? - ANSWER failing to ignore sunk costs,
measuring costs and benefits as proportions,
A girl is given $15 by her parents. She has two options of how to spend the money. She
can either save the money for future purchases or she can start a lemonade stand on
her driveway. If she spends her $15 on the lemonade stand, there is a 50% chance she
will lose $10 and a 50% chance she will gain $12. Suppose the girl has a square root
utility function. What should she do with the money? - ANSWER save her money
The Florida Lottery has done extensive research on the people who buy their products.
They've found that their customers have a square root utility function and an initial
wealth of $100. It takes $19 to buy a lottery ticket and each lottery ticket has a 50/50
chance of being worth $39. True or False, customers will buy these lottery tickets. -
ANSWER False
What are the two reasons describing why people save? - ANSWER security and
speculation
Goods provided by the government that fit the definition of a public good, but can be
, delivered in such a way that exclusion is possible are called what? - ANSWER Quasi-
public goods
How can positive externalities be correct? - ANSWER subsidizing consumers,
subsidizing suppliers, allowing the government to provide goods
True the free market does not look after consumers' interests.
Which, according to "Balancing Liberty and the Pursuit of Well-Being", the author
criticizes more than once? Libertarianism
What is the most common from of ownership in the US? sole proprietorship
According to "The US Economy: Private and Public Sectors" What fraction of its income
does a typical householders save? 3%
Molly goes to the grocery store and spends $75 on food. Based on the reading "The US
Economy: Private and Public Sectors", which of the following best characterizes her
purchase? - ANSWER non-durable goods
Based on the reading "The US Economy: Private and Public Sectors", what do taxes that
are based on wages and salaries are called? - ANSWER Payroll taxes
What is the term that describes how a monody controls an industry? - ANSWER Supple
What is the definition of risk on an individual level? -ANSWER uncertainty regarding loss
What is the definition of risk on an organizational level? -ANSWER uncertainty regarding
loss and things that prevent the organization from reaching their objectives. it adversely
affects the achievements of an organization;s objectives
