微观经济学（第九版）试题英文版chapter 05.docx

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1、Microeconomics, 9e (Pindyck/Rubinfeld)Chapter 5 Uncertainty and Consumer Behavior5.1 Describing Risk1) Refer to Figure 5.1.1 above. Which of the two jobs is more risky?A) Job 1B)Job 2C) Both are equally risky.D) Neither job is risky.Answer: ADiff： 1Section: 5.12) Refer to Figure 5.1.2 above. When Jo

2、b 1 is compared to Job 2, we come to the following conclusion:A) Job 1 has a lower expected return, but is less risky.B) Job 1 has a higher expected return, but is more risky.C) Job 1 has a higher expected return and is less risky than Job 2.D) Job 1 has a lower expected return and is more risky tha

3、n Job 2.Answer: BAssume 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.Answer: CDiff: 1Section: 5

4、.1The weighted average of all possible outcomes of a project, with the probabilities of the outcomes used as weights, is known as the:A) variance.B) standard deviation.C) expected value.D) coefficient of variation.Answer: CDiff： 1Section: 5.1Which of the following is NOT a generally accepted measure

5、 of the riskiness of an investment?A) Standard deviationExpected valueB) Variancenone of the aboveAnswer: BDiff: 1Section: 5.1The expected value of a project is always the:A) median value of the project.B) modal value of the project.C) standard deviation of the project.D) weighted average of the out

6、comes, with probabilities of the outcomes used as weights.Answer: DDiff: 1Section: 5.128) 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 out

7、come?A)00.25B) 0.50.乃E)1.0Answer: DDiff： 1Section: 5.129) The variance of an investment opportunity: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.Answer: ADiff： 2Section: 5.

8、1An investment opportunity is a sure thing; it will pay off $100 regardless of which of the three possible outcomes comes to pass. The variance of this investment opportunity:A) is 0.B) isl.C) is 2.D) is-1.E) cannot be determined without knowing the probabilities of each of the outcomes.Answer: ADif

9、f: 2Section: 5.1An investment opportunity has two possible outcomes. The expected value of the investment opportunity is $250. One outcome yields a $100 payoff and has a probability of 0.25. What is the payoff of the other outcome?A) -$400$0C)$150D)$300E) none of the aboveAnswer: DDiff: 2Section: 5.

10、1Scenario 5.4:Suppose an individual is considering an investment in which there are exactly three possible outcomes, whose probabilities and payoffs are given below:OutcomeProbabilityPayoffsA.3$100B?50C.27The expected value of the investment is $25, Although all the information is correct, informati

11、on is missing.36) Refer to Scenario 5.4. What is the probability of outcome B? A)0-0.5B) 0.50.4C) 0.2Answer: CDiff： 2Section: 5.137) Refer to Scenario 5.4. What is the payoff of outcome C?A) -150B)0C) 25D)100E) 150Answer: ADiff: 2Section: 5.138) Refer to Scenario 5.4. What is the deviation of outcom

12、e A?A) 3050B) 75D) 100Answer: CDiff: 2Section: 5.139) Refer to Scenario 5.4. What is the variance of the investment?A) -75275C) 3,150D) 4,637.50E) 8,125Answer: EDiff: 2Section: 5.140) Refer to Scenario 5.4. What is the standard deviation of the investment?A)016.58B) 56.1290.14C) none of the aboveAns

13、wer: DDiff: 2Section: 5.141) 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) is greater than $20,000.D) cannot be determined with the

14、information provided.Answer: BDiff： 1Section: 5.1Use the following statements to answer this question:I) Subjective probabilities are based on individual perceptions about the relative likelihood of an event. II. To be useful in microeconomic analysis, all interested parties should agree on the valu

15、es of the relevant subjective probabilities for a particular problem.J) I and II are true.K) I is true and II is false.L) II is true and I is false.M) I and II are false.Answer: BDiff: 1Section: 5.142) People often use probability statements to describe events that can only happen once. For example,

16、 a political consultant may offer their opinion about the probability that a particular candidate may win the next election. Probability statements like these are based on probabilities.A) frequency-basedobjectiveB) subjectiveuniversally knownAnswer: CDiff: 1Section: 5.1To optimally deter crime, law

17、 enforcement authorities should:A) set higher fines for crimes that have a lower probability of being caught.B) set the fine equal to the expected benefit, even if it is difficult to catch the offenders.C) ignore the probabilities of catching offenders and attempt to prevent crime at all costs.D) se

18、t very high fines regardless of the probability that an offender is caught. Answer: ADiff: 1Section: 5.143) Tom Wilson is the operations manager for BiCorp, a real estate investment firm. Tom must decide if BiCorp is to invest in a strip mall in a northeast metropolitan area. If the shopping center

19、is highly successful, after tax profits will be $100,000 per year. Moderate success would yield an annual profit of $50,000, while the project will lose $10,000 per year if it is unsuccessful. Past experience suggests that there is a 40% chance that the project will be highly successful, a 40% chanc

20、e of moderate success, and a 20% probability that the project will be unsuccessful.a. Calculate the expected value and standard deviation of profit.b. The project requires an $800,000 investment. If BiCorp has an 8% opportunity cost on invested funds of similar riskiness, should the project be under

21、taken?Answer:a.Expected Value A A77 = 2 7T i P i i=1AAA A Pi pi100,000.440,00050,000.420,000-10,000.2-2,000n = 58,000Standard deviationPiPini100,00050,000-10,00042,0001,764,000,000705,600,000-8,00064,000,00025,600,000-68,0004,624,000,000924,800,0002 = 1,656,000,000(J = 40,693.98b.Bio-Corps opportuni

22、ty cost is 8% of 800,000 or0.08x800,000 = 64,000.The expected value of the project is less than the opportunity cost. Bi-Corp should not undertake the project.Diff： 2Section: 5.144) John Smith is considering the purchase of a used car that has a bank book value of $16,000. He believes that there is

23、a 20% chance that the cars transmission is damaged. If the transmission is damaged, the car would be worth only $12,000 to Smith. What is the expected value of the car to Smith? Answer: Expected Value = E($)= Pr(X) + (1 - Pr)(X2),where Pr is the probability of no transmission damage and Xi is the bo

24、ok value of the car without and with transmission damage, respectively.E($) = .80(16,000) + .20(12,000) =12,800 + 2,400 =$15,200Diff: 2Section: 5.1C and S Metal Company produces stainless steel pots and pans. C and S can pursue either of two distribution plans for the coming year. The firm can eithe

25、r produce pots and pans for sale under a discount store label or manufacture a higher quality line for specialty stores and expensive mail order catalogs. High initial setup costs along with C and Ss limited capacity make it impossible for the firm to produce both lines. Profits under each plan depe

26、nd upon the state of the economy. One of three conditions will prevail:growth (probability = 0.3)normal (probability = 0.5)recession (probability = 0.2)The outcome under each plan for each state of the economy is given in the table below. Figures in the table are profits measured in dollars. The pro

27、babilities for each economic condition represent crude estimates.Economic Condition Discount Line Specialty LineGrowth250,000400,000Normal220,000230,000Recession140,00020,000Calculate the expected value for each alternative.a. Which alternative is more risky? (Calculate the standard deviation of pro

28、fits for each altemative.) c. Taking into account the importance of risk, which alternative should an investor choose?Answer:a.Expected Value Discount Line0.3(250,000) + 0.5(220,000) + 0.2(140,000)EV = 213,000(71 = 213,000)Expected Value Specialty Line0.3(400,000) + 0.5(230,000) + 0.2(20.000)EV = 23

29、9,000(7i = 239,000)b.。2 for discount line.AniA_7T j - 77口i - n2Pj250,00037,000410,700,000220,0007,00024,500,000140,000-73,000j = 38,743Expected Value Specialty Line:1,065,800,0001,501,000,000AA _7T j - 7T卜-可2吟400,000161,0007,776,300,000230,000-9,00040,500,00020,000-219,0009,592,200,000a2 = 16,809,00

30、0,000 (7 = 129,650The discount store opportunity is far less risky.The specialty store offers a higher expected return but not in proportion to the increased risk (one could compute the coefficient of variation or observe this fact).Diff： 3Section: 5.145) Calculate the expected value of the followin

31、g game. If you win the game, your wealth will increase by 36 times your wager. If you lose, you lose your wager amount. The probability of winning is V38Calculate the variance of the game.Answer: The expected value (EV) of the game is calculated asThe variance of the game is calculated asVar = 18 卜”

32、-司之 +-12 =写+ 1 。城=35碗2Diff: 3Section: 5.146) Calculate the expected value of the following game. If you win the game, your wealth will increase by 100,000,000 times your wager. If you lose, you lose your wager amount.The probability of winning is 5.r 82,0()0,000Answer: The expected value of the game

33、 is calculated asri/ 1 Hmnnnnm、1,999,999. .98,000,00100nH= 20)0,00。w = 4.,Diff: 2Section: 5.15.2 Preferences Toward RiskAssume 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

34、most investors (who dislike risk) to prefer investment opportunity:A) 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.Answer: CDiff： 1Section: 5.2Scenario 5.5:Engineers at Jalopy Automotive have

35、 discovered a safety flaw in their new model car. It would 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 o

36、ne discovers flaw.15$0B. Government fines firm.40$10 million(no lawsuits)C. Resulting lawsuits are lost.30$12 million(no government fine)D. Resulting lawsuits are won.15$2 million(no government fine)2) Refer to Scenario 5.5. The expected cost to the firm if it does not fix the car is:A) $0.B) $24 mi

37、llion.C) $7.9 million.D) $2 million.E) $3.6 million.Answer: CDiff: 1Section: 5.2Diff: 1Section: 5.1Scenario 5.1: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. Sara

38、h believes they have a 75% chance of earning $100,000 and a 25% chance of earning $10,000.3) Refer to Scenario 5.1. The expected value of the undertaking,according to Sarah, is $75,000.A) according to Sarah, is $100,000.B) according to Sarah, is SI 10,000.C) according to Aline, is $200,000.D) accord

39、ing to Aline, is $100,000.Answer: EDiff： 1Section: 5.1Refer to Scenario 5.1. 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 be

40、cause the event hasnt happened yet.D) subjective because the event hasnt happened yet.E) subjective because they are estimates made by individuals based upon personal judgment or experience.Answer: EDiff: 1Section: 5.1Scenario 52Randy and Samantha are shopping for new cars (one each). Randy expects

41、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.4) Refer to Scenario 5.2. Which of the following is true?A) Randy has a higher expected expense than Samantha for the car.B) Randy has a lower e

42、xpected 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 tru

43、e probabilities are known.Answer: ADiff： 1Section: 5.1Refer to Scenario 5.5. 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

44、to tell whether the expected cost of fixing the car is less than the cost of fixing it, because the probabilities are subjective.D) It is not possible to tell whether the expected cost of fixing the car is less than the cost of fixing it, because the probabilities are not equal.Answer: BDiff: 2Secti

45、on: 5.2Refer to Scenario 5.5. Jalopy Automotives executives,A) if risk-neutral, would fix the flaw because it enables them to have a sure outcome.B) if risk-neutral, would fix the flaw because the cost of fixing the flaw is less than the expected cost of not fixing it.C) if risk-loving, would fix th

46、e flaw because it enables them to have a sure outcome.D) if risk-averse, would not fix the flaw because the cost of fixing the flaw is more than the expected cost of not fixing it.E) would fix the flaw regardless of their risk preference, because of the large probability of high-cost outcomes.Answer

47、: BDiff: 2Section: 5.2Other things equal, expected income can be used as a direct measure of well-being:A) always.B) no matter what a persons preference to risk.C) if and only if individuals are not risk-loving.D) if and only if individuals are risk averse.E) if and only if individuals are risk neutral.Answer: EDiff: 1Section: 5.2A person with a diminishing marginal utility of income:A) will be risk averse.B) will be risk neutral.C) will be risk loving.D) cannot decide without more informationAnswer: ADiff: 1Section: 5.23) An individual with a constant marginal util