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# Principles of Microeconomics

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## Quiz 17 : Uncertainty and Asymmetric Information

Mark has two job offers when he graduates from college. Mark views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $40,000. The second offer is at a fixed salary of$20,000 plus a possible bonus of $40,000. Mark believes that he has a 50-50 chance of earning the bonus. If Mark takes the offer that maximizes his expected utility and is risk-loving, which job offer will he choose? Free Multiple Choice Answer: Answer: B Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1 -Refer to Figure 17.1. Dmitri has two job offers when he graduates from college. Dmitri views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of$40,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of$40,000. Dmitri believes that he has a 50-50 chance of earning the bonus. Dmitri's expected value from the first job offer is ________ and is ________ from the second job offer.
Free
Multiple Choice

B

Refer to the information provided in Figure 17.2 below to answer the question(s) that follow. Figure 17.2 -Refer to Figure 17.2. We would say that Sam is risk neutral based on his
Free
Multiple Choice

A

Consider the following game. You roll a six-sided die and each time you roll a 6, you get $30. For all other outcomes you pay$6. Since the expected value of this game is $0, the game is called a(n) Multiple Choice Answer: Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1 -Refer to Figure 17.1. Suppose John's utility from income is given in the figure. From this we would say that John is Multiple Choice Answer: Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1 -Refer to Figure 17.1. Dmitri has two job offers when he graduates from college. Dmitri views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of$40,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of$40,000. Dmitri believes that he has a 50-50 chance of earning the bonus. If Dmitri takes the offer that maximizes his expected utility and is he is risk averse, then
Multiple Choice
Mark has two job offers when he graduates from college. Mark views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $50,000. The second offer is at a fixed salary of$20,000 plus a possible bonus of $60,000. Mark believes that he has a 50-50 chance of earning the bonus. If Mark takes the offer that maximizes his expected utility and is risk-neutral, which job offer will he choose? Multiple Choice Answer: Refer to the information provided in Figure 17.2 below to answer the question(s) that follow. Figure 17.2 -Refer to Figure 17.2. Fiona has two job offers when she graduates from college. Fiona views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of$60,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of$80,000. Fiona believes that she has a 50-50 chance of earning the bonus. If Fiona takes the offer that maximizes her expected utility and she is risk-neutral, then
Multiple Choice
The sum of the utilities from each possible outcome of a situation weighted by the probability of that outcome is known as
Multiple Choice
Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1 -Refer to Figure 17.1. John has two job offers when he graduates from college. John views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $50,000. The second offer is at a fixed salary of$20,000 plus a possible bonus of $60,000. John believes that he has a 50-50 chance of earning the bonus. What is the expected value of John's income for each job offer? Multiple Choice Answer: Consider the following game. You roll a six-sided die and each time you roll a 6, you get$30. For all other outcomes you pay $6. What is the expected value of the game? Multiple Choice Answer: Refer to the information provided in Figure 17.2 below to answer the question(s) that follow. Figure 17.2 -Refer to Figure 17.2. Suppose Sam's utility from income is given in the diagram. From this we would say that Sam is Multiple Choice Answer: For most people, as their income increases, their utility from that income ________ at a(n) ________ rate. Multiple Choice Answer: Refer to the information provided in Figure 17.2 below to answer the question(s) that follow. Figure 17.2 -Refer to Figure 17.2. Sam has two job offers when he graduates from college. Sam views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of$60,000. The second offer is at a fixed salary of $30,000 plus a possible bonus of$60,000. Sam believes that he has a 50-50 chance of earning the bonus. If Sam takes the offer that maximizes his expected utility and is risk-neutral, which job offer will he choose?
Multiple Choice
Consider the following game. You roll a six-sided die and each time you roll a 6, you get $30. For all other outcomes you pay$6. The $30 when you "win" and the -$6 when you "lose" are called
Multiple Choice
Consider the following game. You pick a card from a deck and each time you select an ace, you get $260. For all other cards you must pay$13. What is the expected value of the game?
Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1 -Refer to Figure 17.1. John has two job offers when he graduates from college. John views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $50,000. The second offer is at a fixed salary of$20,000 plus a possible bonus of $60,000. John believes that he has a 50-50 chance of earning the bonus. If John takes the offer that maximizes his expected utility and is risk-averse, which job offer will he choose? Multiple Choice Answer: Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1 -Refer to Figure 17.1. John has two job offers when he graduates from college. John views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of$50,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of$60,000. John believes that he has a 50-50 chance of earning the bonus. What is John's expected utility for each job offer?
Refer to the information provided in Figure 17.1 below to answer the question(s) that follow. Figure 17.1 -Refer to Figure 17.1. Dmitri has two job offers when he graduates from college. Dmitri views the offers as identical, except for the salary terms. The first offer is at a fixed annual salary of $40,000. The second offer is at a fixed salary of$20,000 plus a possible bonus of \$40,000. Dmitri believes that he has a 50-50 chance of earning the bonus. Dmitri's expected utility from the first job offer is ________ and it is ________ from the second job offer.