Uncertainty and Consumer Behavior.doc

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1、TEST BANKCHAPTER 5SIXTH EDITIONUNCERTAINTY AND CONSUMER BEHAVIORMULTIPLE CHOICESECTION 5.1Scenario 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 dont, theyll earn $0. Sarah believes

2、they have a 75% chance of earning $100,000 and a 25% chance of earning $10,000.easy1.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 A

3、line, is $100,000.easy2.Refer to Scenario 1. The probabilities discussed in the information above area. 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 hasnt happened ye

4、t.d. subjective because the event hasnt 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 prob

5、ability. Samantha expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability.easy3.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 Saman

6、tha 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.easy4.Refer to Scenario 2. Randys

7、expected expense for his car isa. $20,000.b. $19,000.c. $18,000.d. $17,500.e. $15,000.easy5.Refer to Scenario 2. Samanthas expected expense for her car isa. $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 Meg

8、alopolis:Table 5.1MajorProbability of Receiving an Offer In One YearAverage Salary OfferAccounting95$25,000Economics.90$30,000English.70$24,000Poli Sci.60$18,000Mathematics1.00$21,000easy6.Refer to Table 5.1. Expected income for the first year isa. highest in accounting.b. highest in mathematics.c.

9、higher in English than in mathematics.d. higher in political science than in economics.e. highest in economics.easy7.Refer to Table 5.1. Ranked highest to lowest in expected income, the majors area. economics, accounting, English, mathematics, political science.b. mathematics, English, political sci

10、ence, accounting, economics.c. economics, accounting, mathematics, English, political science.d. English, economics, mathematics, accounting, political science.e. accounting, English, mathematics, political science, economics.Scenario 3:Wanting to invest in the computer games industry, you select Wh

11、izbo, Yowzo and Zowiebo as the three best firms. Over the past 10 years, the three firms have had good years and bad years. The following table shows their performance:CompanyGood Year RevenueBad Year RevenueNumber of Good YearsWhizbo$8 million$6 million8Yowzo$10 million$4 million4Zowiebo$30 million

12、$1 million1easy8.Refer to Scenario 3. Where is the highest expected revenue, based on the 10 years past performance?a. Whizbob. Yowzoc. Zowiebod. Whizbo and Yowzoe. Yowzo and Zowieboeasy9.Refer to Scenario 3. Based on the 10 years past performance, what is the probability of a good year for Zowiebo?

13、 $27 milliona. $3 millionb. $1 millionc. 0.9d. 0.1easy10.Refer to Scenario 3. Based on the 10 years past performance, rank the companies expected revenue, highest to lowest:a. Whizbo, Yowzo, Zowiebob. Whizbo, Zowiebo, Yowzoc. Zowiebo, Yowzo, Whizbod. Zowiebo, Whizbo, Yowzoe. Zowiebo, with Whizbo and

14、 Yowzo tied for second.easy11.Refer to Scenario 3. The expected revenue from all three companies combined isa. $11 millionb. $17.9 million.c. $25.5 million.d. $29.5 million.e. $48 million.The information in the table below describes choices for a new doctor. The outcomes represent different macroeco

15、nomic environments, which the individual cannot predict.Table 5.3Outcome 1Outcome 2Job ChoiceProb.IncomeProb.IncomeWork for HMO0.95$100,0000.05$60,000Own practice0.2$250,0000.8$30,000Research0.1$500,0000.9$50,000easy12.Refer to Table 5.3. The expected returns are highest for the physician whoa. work

16、s for an HMO.b. opens her own practice.c. does research.d. either opens her own practice or does research.e. either works for an HMO or does research.easy13.Refer to Table 5.3. Rank the doctors job options in expected income order, highest first.a. Work for HMO, open own practice, do research.b. Wor

17、k for HMO, do research, open own practice.c. Do research, open own practice, work for HMO.d. Do research, work for HMO, open own practice.e. Open own practice, work for HMO, do research.moderate14.In Table 5.3, the standard deviation isa. highest for the HMO choice, and it is $76,000.b. lowest for t

18、he HMO choice.c. higher for owning ones own practice than for going into research.d. higher for the HMO choice than for going into research.moderate15.Refer to Table 5.3. In order to weigh which of the job choices is riskiest, an individual should look ata. the deviation, which is the difference bet

19、ween the probabilities of the two outcomes.b. the deviation, which is the difference between the dollar amounts of the two outcomes.c. the average deviation, which is found by averaging the dollar amounts of the two outcomes.d. the standard deviation, which is the square root of the average squared

20、deviation.e. the standard deviation, which is the squared average square root of the deviation.moderate 16.Refer to Table 5.3. Rank the doctors job choices in order, least risky first.a. Work for HMO, open own practice, do research.b. Work for HMO, do research, open own practice.c. Do research, open

21、 own practice, work for HMO.d. Do research, work for HMO, open own practice.e. Open own practice, work for HMO, do research.easy17.Upon graduation, you are offered three jobs. CompanySalaryBonusProbability of Receiving BonusSamsa Exterminators100,00020,000.90Gradgrind Tech100,00030,000.70Goblin Frui

22、ts115,000-Rank the three job offers in terms of expected income, from the highest to the lowest.a. Samsa Exterminators, Gradgrind Tech, Goblin Fruits.b. Samsa Exterminators, Goblin Fruits, Gradgrind Tech.c. Gradgrind Tech, Samsa Exterminators, Goblin Fruits.d. Gradgrind Tech, Goblin Fruits, Samsa Ex

23、terminators.e. Goblin Fruits, Samsa Exterminators, Gradgrind Tech.easy18.As president and CEO of MegaWorld industries, you must decide on some very risky alternative investments:ProjectProfit if SuccessfulProbability of SuccessLoss if FailureProbability of FailureA$10 million.5-$6 million.5B$50 mill

24、ion.2-$4 million.8C$90 million.1-$10 million.9D$20 million.8-$50 million.2E$15 million.4$0.6The highest expected return belongs to investmenta. A.b. B.c. C.d. D.moderate19.What is the advantage of the standard deviation over the average deviation?a. Because the standard deviation requires squaring o

25、f deviations before further computation, positive and negative deviations do not cancel out. b. Because the standard deviation does not require squaring of deviations, it is easy to tell whether deviations are positive or negative.c. The standard deviation removes the units from the calculation, and

26、 delivers a pure number.d. The standard deviation expresses the average deviation in percentage terms, so that different choices can be more easily compared.e. The standard deviation transforms subjective probabilities into objective ones so that calculations can be performed.Table 5.4JobOutcome 1De

27、viationOutcome 2DeviationA$40W$60XB$20Y$50Zeasy20.Refer to Table 5.4. If outcomes 1 and 2 are equally likely at Job A, then in absolute valuea. W = X = $10.b. W = X = $20.c. W = Y = $100.d. W = Y = $200.e. W = Y = $300.easy21.Refer to Table 5.4. If outcomes 1 and 2 are equally likely at Job A, then

28、the standard deviation of payoffs at Job A isa. $1.b. $10.c. $40.d. $50.e. $60.easy22.Refer to Table 5.4. If at Job B the $20 outcome occurs with probability .2, and the $50 outcome occurs with probability .8, then in absolute valuea. Y = Z = $6.b. Y = Z = $24.c. Y = Z = $35.d. Y = $24; Z = $6.e. Y

29、= $6; Z = $24.moderate23.Refer to Table 5.4. If at Job B the $20 outcome occurs with probability .2, and the $50 outcome occurs with probability .8, then the standard deviation of payoffs at Job B is nearest which value?a. $10.b. $12.c. $20.d. $35.e. $44.moderate24.Refer to Table 5.4. If outcomes 1

30、and 2 are equally likely at Job A, and if at Job B the $20 outcome occurs with probability .1, and the $50 outcome occurs with probability .9, thena. Job A is safer because the difference in the probabilities is lower.b. Job A is riskier only because the expected value is lower.c. Job A is riskier b

31、ecause the standard deviation is higher.d. Job B is riskier because the difference in the probabilities is higher.e. There is no definite way given this information to tell how risky the two jobs are.easy25. The expected value is a measure ofa. risk.b. variability.c. uncertainty.d. central tendency.

32、easy26.Assume that one of two possible outcomes will follow a decision. One outcome yields a $75 payoff and has a probability of 0.3; the other outcome has a $125 payoff and has a probability of 0.7. In this case the expected value is a. $85. b. $60. c. $110.d. $35.easy27.The weighted average of all

33、 possible outcomes of a project, with the probabilities of the outcomes used as weights, is known as thea. variance. b. standard deviation. c. expected valued. coefficient of variation.easy28. Which of the following is NOT a generally accepted measure of the riskiness of an investment?a. standard de

34、viation. b. expected value.c. variance.d. none of these.easy29. The expected value of a project is always thea. median value of the project.b. modal value of the project.c. standard deviation of the project.d. weighted average of the outcomes, with probabilities of the outcomes used as weights.easy3

35、0. An investment opportunity has two possible outcomes, and the value of the investment opportunity is $250. One outcome yields a $100 payoff and has a probability of 0.25. What is the probability of the other outcome?a. 0b. 0.25c. 0.5d. 0.75e. 1.0moderate31.The variance of an investment opportunity

36、:a. cannot be negative.b. has the same unit of measure as the variable from which it is derived.c. is a measure of central tendency.d. is unrelated to the standard deviation.moderate32.An investment opportunity is a sure thing; it will pay off $100 regardless of which of the three possible outcomes

37、comes to pass. The variance of this investment opportunity:a. is 0.b. is 1.c. is 2.d. is -1.e. cannot be determined without knowing the probabilities of each of the outcomes.moderate33.An investment opportunity has two possible outcomes. The expected value of the investment opportunity is $250. One

38、outcome yields a $100 payoff and has a probability of 0.25. What is the payoff of the other outcome?a. -$400b. $0c. $150d. $300e. none of the aboveScenario 4:Suppose an individual is considering an investment in which there are exactly three possible outcomes, whose probabilities and pay-offs are gi

39、ven below:OutcomeProbabilityPay-offsA.3$100B?50C.2?The expected value of the investment is $25. Although all the information is correct, information is missing.moderate34.Refer to Scenario 4. What is the probability of outcome B?a. 0b. -0.5c. 0.5d. 0.4e. 0.2moderate35.Refer to Scenario 4. What is th

40、e pay-off of outcome C?a. -150b. 0c. 25d. 100e. 150moderate36.Refer to Scenario 4. What is the deviation of outcome A?a. 30b. 50c. 75d. 100moderate37.Refer to Scenario 4. What is the variance of the investment?a. -75b. 275c. 3,150d. 4,637.50e. 8,125moderate38.Refer to Scenario 4. What is the standar

41、d deviation of the investment?a. 0b. 16.58c. 56.12d. 90.14e. none of the aboveeasy39.Blanca has her choice of either a certain income of $20,000 or a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. The expected value of the gamble:a. is less than $20,000.b. is $20,000.c. i

42、s greater than $20,000.d. cannot be determined with the information provided.SECTION 5.2easy40.Assume that two investment opportunities have identical expected values of $100,000. Investment A has a variance of 25,000, while investment Bs variance is 10,000. We would expect most investors (who disli

43、ke risk) to prefer investment opportunitya. A because it has less risk.b. A because it provides higher potential earnings.c. B because it has less risk.d. B because of its higher potential earnings.Scenario 5:Engineers at Jalopy Automotive have discovered a safety flaw in their new model car. It wou

44、ld cost $500 per car to fix the flaw, and 10,000 cars have been sold. The company works out the following possible scenarios for what might happen if the car is not fixed, and assigns probabilities to those events:ScenarioProbabilityCostA. No one discovers flaw.15$0B. Government fines firm.40$10 mil

45、lion(no lawsuits)C. Resulting lawsuits are lost.30$12 million(no government fine)D. Resulting lawsuits are won.15$2 million(no government fine)easy41.Refer to Scenario 5. The expected cost to the firm if it does not fix the car isa. $0b. $24 million.c. $7.9 million.d. $2 million.e. $3.6 million.mode

46、rate42.Refer to Scenario 5. Which of the following statements is true?a. The expected cost of not fixing the car is less than the cost of fixing it.b. The expected cost of not fixing the car is greater than the cost of fixing it.c. It is not possible to tell whether the expected cost of fixing the car is less than the cost of fixing it,