Answerthefollowingquestionscorrectly:

Attachments.,

1.According to a WSJ article, in Britain, drug companies are paying for nurses to study patient charts to identify people with chronic illnesses. "The nurses then recommend which patients should be called in for a check-up and perhaps prescribe new treatment. The work is part of what the industry calls "disease management programs", which the companies say improve care for people with illnesses like diabetes, asthma or heart disease". Source: Jeanne Whalen, "Drug Makers Finance Nurses for U.K. Doctors". Wall Street Journal, 30 May 2007, Page B1. Which of the following best explains the actions of the drug companies?

Select one:

a. Drug companies see this program as a way of educating patients about the various drug choices available to them

b. The companies see this program as a way to market their own products

c. The companies are committed to improving patient care in Britain

d. The companies are doing their part to ease the health care crisis in the Britain

2. According to the economic way of thinking,

Select one: a. The value of a good is determined by the cost of the resources used to produce that good

b. A nation's wealth can be increased by shifting the production possibilities frontier inward

c. Innovation makes it possible to produce a good without giving up the production of another good

d. Costs are incurred when scarce resources are used to produce goods

3. All of the statements are true about markets except:

Select one:

a. Markets excel at wealth creation because they often provide incentives for self-interested individuals to take socially beneficial actions

b. Markets function even without an administrator to coordinate the consumption and production plans of buyers and suppliers respectively

c. The most equitable way to distribute goods and services is through markets

d. Markets are generally an efficient way to facilitate the exchange of goods, services and resources

4. An institutional arrangement that provides people with opportunities and procedures for exchanging goods, services and resources is called: Select one: a. Barter

b. A social economy

c. Trade

d. A market

5. Concerned that California's high-occupancy vehicle (HOV) lanes were not operating at full capacity and therefore not easing congestion as much as they could, in 2006, California lawmakers authorized the state's Department of Motor Vehicles to distribute 85,000 stickers to owners of gasoline-electric hybrid cars. Which of the following are consequences of this policy? (i) The stickers increased the demand for hybrid vehicles which qualified for stickers. (ii) The price of hybrid vehicles increased. (iii) The HOV lanes became clogged with hybrid vehicles which further aggravated congestion.

Select one: a. (i) and (ii) only

b. (i), (ii) and (iii)

c. (ii) and (iii) only

d. (i) only

6. Consider the following policy: To make sure that poor people receive emergency treatment the U.S. government forces emergency rooms to offer free care to poor patients. Which of the following is a consequence of this policy? Select one: a. Hospitals in poor neighborhoods are likely to close their emergency rooms because of the high cost of providing free treatment to poor patients b. Hospitals will have to offer higher salaries to doctors and nurses to induce them to work in poor neighborhoods c. More hospitals are likely to open emergency care facilities in poor neighborhoods because of increased demand d. The wait time in emergency rooms will fall 7. Consider the following three statements: (i) The slump in the housing market has led to an increase in unemployment in the housing construction market. (ii) The Federal Reserve decided to keep interest rates unchanged, motivated by the slump in the housing market. (iii) The California Air Resources Board passed a regulation requiring that 10% of all large automobiles sold in California from 2008 onward be zero-emissions vehicles: cars powered by electricity or alternative fuels like hydrogen. Which of the statements is a macroeconomics issue? Select one: a. (ii) only

b. (i), (ii) and (iii)

c. (i) and (ii) only

d. (ii) and (iii) only

8. Consider the following three statements: (i) The slump in the housing market has led to an increase in unemployment in the housing construction market. (ii) The Federal Reserve decided to keep interest rates unchanged, motivated by the slump in the housing market. (iii) The California Air Resources Board passed a regulation requiring that 10% of all large automobiles sold in California from 2008 onward be zero-emissions vehicles: cars powered by electricity or alternative fuels like hydrogen. Which of the statements is largely a microeconomics issue? Select one:

a. (i) and (iii) only

b. None of the above statements is a microeconomics issue

c. (iii) only

d. (i) only

9. Consider the following two medical procedures for a particular chronic illness. Procedure X has a very high patient survival rate, but patients are likely to suffer significant brain damage that greatly diminishes one's quality of life. Procedure Y has a much lower survival rate, but if a patient survives she is able to lead a full and normal life. If surgeons are compensated only if their patients survive, how will this policy affect the treatment for this illness? Select one:

a. More of procedure X will be performed although patients are likely to suffer significant brain damage

b. Surgeons have no incentive to treat this illness

c. More of procedure Y will be performed because patients will able to lead full and normal lives

d. Patients have no incentive to seek treatment for this illness

10. Daikin, Possner and Zoe are discussing what it means to say that people respond to incentives. Here is an excerpt from their conversation. Daikin: It means that people are required to behave in a cooperative fashion so that the citizens of a nation can coexist peacefully. Possner: It means that people act in ways that society approves. No rational person will do business with immoral characters. Zoe: It means that people undertake certain actions if they know that doing so will result in some form of material reward that they will not otherwise receive. Whose view accords with the economic way of thinking? Select one:

a. Only the views of Daikin and Zoe exhibit the economic way of thinking

b. Possner's view is the only one that exhibits the economic way of thinking

c. All three of their views exhibit the economic way of thinking

d. Zoe's view is the only one that exhibits the economic way of thinking

11. Economists argue that self-interested behavior could perform the following except: Select one:

a. Induce people to take actions that make themselves worse off

b. Cause people to take actions that are destructive to society

c. Lead to actions that are in the best interests of society

d. Induce people to take actions that make themselves and others better off

12. Innovation in a society will: Select one:

a. Shift the production possibilities frontier outward

b. Shift the production possibilities frontier inward

c. make a decline in overall wealth as people lose their jobs to machines that do the same work more efficiently

d. Produce a shift from one point on the production possibilities frontier to another point on the same frontier

13. Liz Kooy loves sharp cheddar cheese and is willing to pay almost any price for it. She said, "Ten dollars a brick, I'd still buy it and cut back on other purchases". Which of the following does this statement demonstrate? Select one:

a. For the product cheddar cheese, when price goes up, quantity demanded rises

b. Producers can take advantage of those who have a weakness for cheddar cheese by raising the price to increase profit

c. People face tradeoffs

d. People are not always rational

14. Markets excel at wealth creation because: Select one:

a. They provide incentives for self-interested individuals to take socially beneficial actions

b. They use the government to transfer resources from those who use resources less productively to those who use it more productively

c. Market economies have managed to coerce wealth from non-market nations, making the market economies better off at the expense of the other countries

d. People in market economies tend to be less self-interested and search for more creative ways to serve the common good

15. Movie theatres in the U.S. often charge different prices based on the basis of customers' age and the time of the day when the movie is shown. However, theatres usually charge the same price for all movies regardless of the movie's quality and popularity. Why is this case? Select one:

a. It is virtually costless to price discriminate on the basis of age and screening time, but a movie's quality and popularity involve subjective judgment, which makes popular movies more difficult to identify

b. If theaters charged higher prices for some movies everyone would think these higher priced movies were better. As a result, no one would pay to see the lower priced movies

c. If theatres charged higher prices for popular movies, they will discriminate against low-income individuals, which is illegal in the U.S

d. Theatres do not want to alienate powerful movie distributors

16. North Korea contains most of the Korean peninsula's mineral resources and has rejected markets in favor of a socialist path to economic development. South Korea has pursued more of a market economy. The consequence has been: Select one:

a. Greater industrial production in South Korea, but greater individual well-being in North Korea

b. Increased prosperity in North Korea and poverty in South Korea

c. Increased prosperity in South Korea and poverty in North Korea

d. Improved economic conditions in both nations since socialism and markets are equally capable of producing wealth

17. Owners and buyers of goods and services respond to incentives created by the prices of these products. A low price of a good or service encourages: Select one:

a. Buyers to purchase less of that good and owners to supply more of that good

b. Owners to supply more of that good and buyers to purchase more of that good

c. Buyers to purchase more of that good and owners to supply more of that good

d. Owners to supply less of that good and buyers to purchase more of that good

18. Owners and buyers of resources respond to incentives created by the prices of the resources. A high price of a resource encourages: Select one:

a. Buyers to purchase more of that resource

b. Owners to supply less of that resource at present

c. Owners to conserve more of that resource for future use

d. Buyers to purchase less of that resource

19. Production possibility frontiers show: Select one:

a. The possibility of using the same resources to produce two or more goods simultaneously

b. The trade-offs a country (or person) must make if it is already using all its productive resources but wants to make more of one good

c. The trade-offs a nation (or person) faces if it goes from wasting resources to using all available resources to produce a combination of goods

d. The amount of resources it takes to produce a good

20. Specialization does all of the following except: Select one:

a. Lead to an increase in wealth although people do rely on others for some goods

b. Allow people to develop very high levels of skill at their chosen profession

c. Allow individuals to become more self-sufficient

d. Allow society to increase the total number of goods it will have to trade off

21. Suppose Galesburg produces only two goods: textiles and wheat. Table 1-1 shows the combinations of the two goods that Galesburg can produce if it uses all its productive resources to their maximum capacity. Table 1-1

Output combinationTextiles (bales)Wheat (bushels)

G1000

H80120

I60220

J40300

K20360

L0400

If Galesburg is currently producing at point H, what is the opportunity cost of obtaining an additional 100 bushels of wheat? Select one:

a. 360 bales of textilesb. 60 bales of textilesc. 240 bales of textilesd. 20 bales of textiles

22. Suppose Galesburg is currently producing at point K and would like to move to point J. This movement: Select one:

a. Requires a sacrifice of 60 bushels of wheat to obtain an additional 20 bales of textiles

b. Enables it to obtain an additional 20 bales of textiles and an additional 60 bushels of wheat

c. Enables Galesburg to increase textile production with no reduction in wheat production

d. Suggests that point K is an inefficient choice for Galesburg

23. Suppose Galesburg is currently producing 60 bales of textiles and 200 bushels of wheat. Which of the following statements is true? Select one:

a. It is not possible to produce more wheat without sacrificing any textiles

b. The price of wheat must have fallen, so producers have reduced their supply of wheat

c. The people of Galesburg do not value wheat as highly as they value textiles

d. It is possible to produce more wheat without sacrificing any textiles

24. Suppose the people of Galesburg want to consume 50 bales of textiles and 310 bushels of wheat. Are they able to achieve this? Select one:

a. Yes, if they are willing to pay higher prices for these products to induce suppliers to produce them

b. No, Galesburg must increase its money supply in order to do so

c. No, at this time Galesburg has insufficient resources to satisfy its consumers' wants

d. Yes, if they rearrange their resource use so as to increase total output

25. Suppose the price of a banana is $0.50, the price of a can of soda is $1.00 and the price of a power bar is $1.50. What is the opportunity cost of a power bar? Select one:

a. 1/2 of a can of sodab. 3 bananas or 1-1/2 cans of soda c. 2/3 of a can of sodad. 1/3 of a banana

26. Suppose to give youths an opportunity to rehabilitate, the government imposes light punishments to any a person under 16 years old who has committed a misdemeanor or a felony crime. Which of the following is an indirect effect of such a policy? Select one:

a. Parents will become less protective of their children

b. The number of juvenile delinquents will fall

c. Government funding for juvenile rehabilitation programs will increase

d. Gangs might use youths to commit serious crimes because if caught, the punishment dealt to a youth is much less severe than that imposed on an adult

27. Suppose you have been offered two jobs and can only work at one of them. The first, a pizza delivery person, pays $12 an hour. The second, a teller at a local bank, pays $14 per hour. Based on this information, what is the opportunity cost of your time? Select one:

a. $14 per hour b. $26 per hourc. $13 per hourd. $12 per hour

28. Suppose you have been offered two jobs and can only work at one of them. The first, a pizza delivery person, pays $12 an hour. The second, a teller at a local bank, pays $14 per hour. What is the opportunity cost of your decision to work as a pizza delivery person? Select one:

a. $0 since I can only work at one job

b. $14 minus the enjoyment I would have received working as a pizza delivery person

c. $2 plus the value of the experience I would have acquired from the job

d. $12 plus the value of the experience I would have acquired from the job

29. Suppose you have been offered two jobs and can only work at one of them. The first, a pizza delivery person, pays $12 an hour. The second, a teller at a local bank, pays $14 per hour. What is the opportunity cost of your decision to work as a bank teller? Select one:

a. $0 since I have chosen the job that pays better

b. The value of the increase in my marketability by working in a bank

c. The additional enjoyment I would have received working as a pizza delivery person

d. $12 plus the enjoyment I would have received working as a pizza delivery person

30. The assumptions made by economists include all of the following except: Select one:

a. People have unlimited desires but limited resources

b. People make flawless calculations of costs and benefits when making decisions

c. People are self-interested

d. People are rational

31. The branch of economics that focuses on the performance of entire economies is called Select one:

a. Macroeconomicsb. Government economicsc. Public sector economicsd. Microeconomics

32. The opportunity cost of an item is: Select one:

a. Higher than what you paid to obtain that item b. What you could have bought if you did not purchase that item

c. What it costs to make that itemd. The price you paid to acquire that item

33. The opportunity cost of an item is: Select one:

a. The highest-valued alternative that must be given up in order to engage in any economic activity

b. The average value of all the alternatives that you forego in order to engage in any economic activity

c. The value of all the alternatives that must be given up in order to engage in any economic activity

d. The lowest-valued alternative that must be given up in order to engage in any economic activity

34. The production possibilities frontier can be used to demonstrate which of the following?

(i) The best tradeoffs that individuals and societies should make

(ii) The tradeoffs forced on individuals and societies because of scarcity

(iii) The wealth maximizing output combination that an individual or society should choose Select one:

a. (ii) onlyb. (i), (ii) and (ii)c. (i) onlyd. (iii) only

35. Unlimited wants and limited resources: Select one:

a. Can be overcome through innovationb. Are not problems faced by wealthy industrialized nations

c. Necessitate choices about the goods to services to consume d. Can be overcome by increasing wealth

36. What are the two sub-fields of economics? Select one:

a. For-profit economics and not-for-profit economicsb. Private markets and the public sector

c. Microeconomics and macroeconomicsd. Market and non-market economics

37. What do economists mean by "self-interested behavior"? Select one:

a. It means undertaking activities that benefit yourself and a small group of others who are important to you

b. It means undertaking activities motivated by greed

c. It means undertaking activities that maximize one's own welfare

d. It means wanting to pursue a life of leisure

38. When economists say that people act rationally, they mean that: Select one:

a. People do not make incorrect choices

b. People are governed by what others think about them and act accordingly

c. People consider the significant consequences of their actions and make decisions that further their self-interests

d. There are certain common codes of conduct that everyone adheres to

39. Which of the following actions reflect self-interested behavior? (i) Warren Buffett, one of the world's wealthiest individuals, donated more than $30 billion to humanitarian causes such as AIDS and tuberculosis initiatives. (ii) Pfizer Inc., a private pharmaceutical company, sponsored a disease-management program for Florida's Medicaid patients with chronic illnesses such as asthma, diabetes and heart disease. (iii) You agree to babysit your 8-year-old brother instead of going to a kick-boxing class. (iv) You agree to babysit your 8-year-old brother instead of going to a kick-boxing class only if your mother pays you $8 an hour. Select one:

a. All of the above actions except (iii) b. All of the above actionsc. (ii) and (iii) onlyd. (iv) only

40. Which of the following does not qualify as a market? Select one:

a. Bloomingdales Department Store b. The underground drug trade c. Amazon.comd. The French Immigration Department

42. Which of the following is not a key assumption of economics? Select one:

a. People do not undertake activities that make others better off

b. People are self-interested

c. People have limited resources to acquire their wants

d. People are rational

43. Which of the following is not likely to cause the production possibility frontier to shift out? Select one:

a. An increase in the quantity of innovations

b. An increase in specialization which allows people to develop higher levels of skill at their chosen profession

c. Developing markets where self-interested individuals can interact

d. Relying only on governments to allocate resources

44. Which of the following statements is false? Select one:

a. Scarcity affects everyone, including very wealthy people b. Rational people never make mistakes

c. Economists assume people are rationald. Economists assume people have unlimited desires

45. Which of the following statements is false? Select one:

a. When you volunteer to help at a soup kitchen, you face an opportunity cost of your time

b. Mother Teresa faced trade-offs when deciding to help lepers in India rather than some other needy group

c. Economics brings tradeoffs to light but does not inform us of which trade-offs society should make

d. When the government funds research into cancer, it is able to avoid trade-offs because public funds are used rather than private funds

46. Which of the following topics does economics study: (i) the study of human behavior; (ii) the market for organ transplants; (iii) cost and benefits of building a suicide barrier in the Golden Gate Bridge; (iv) the functioning of political institutions. Select one:

a. (i) and (iii) onlyb. (ii) and (iii) onlyc. All of the topics listedd. All of the topics except (iv)

47. Which the following would be likely to raise your opportunity cost of going to college full-time?

(i) You have been offered a full-time job as wardrobe assistant to Paris Hilton that pays $60,000 per year.

(ii) You have been offered a merit scholarship that pays for two years of tuition.

(iii) Your landlord increases the rent on the apartment you are currently living in and will continue to live in even if you choose to attend college full-time.

(iv) An increase in the value of your college trust fund set up by your grandfather. Select one:

a. All of the above

b. (i) and (iii) only

c. All of the above except (ii)

d. (i) only

49. While microeconomics is concerned with the behavior of individuals and firms, macroeconomics:Select one:

a. Does not make use of "micro" ideas such as opportunity cost or self-interest

b. Is concerned with the performance of entire economies

c. Is concerned with normative matters such as fairness, equality and ethics

d. Is only concerned with government activity

50. ou own a Ford car that has lousy gas mileage. You finally trade it for a Hyundai, which is equal in virtually every aspect except that the Hyundai gets much better mileage. What is likely to happen to your gas consumption? Select one:

a. I get better gas mileage and since the cost of driving has gone down, I will drive more so my gas consumption will remain the same

b. It will fall since I will now use less gas

c. I get better gas mileage and since the cost of driving has gone down, I will drive more so the effect on my gas consumption is indeterminate

d. It will go up since I will now drive more

(20 points) Consider the following game, Where player 1 is the row player and player 2 is the column player. WXYZ mm (a) Show that the pure strategy Y for player 2 is strictly dominated by a mixed strategy that plays W and Z with probability .5 each. Give this, should player 1 expect player 2 to use the strategy Y with positive probability? (b) Show that, if Y is deleted from the game, the pure strategy M for player 1 is strictly dominated by a mixed strategy that plays T and B with probability .5 each. Given this, should player 2 expect player 1 to use the strategy M with positive probability? (c) Does any player have a strictly dominated strategy in the reduced game if Y and M are deleted? ((1) Find all the pure and mixed strategy Nash equilibria of this game. 1 Explain why a life insurance company might need to set up non-unit reserves in respect of a unit-linked life assurance contract. 2 The following table shows (in f's) a profit testing calculation (with some of the entries missing) for three-year endowment assurance contracts issued to lives aged exactly 57 with a sum assured of 65,000 payable at the end of the year of death. Outgo terms are shown as negative entries. Expected Expected cost cost of death Profit Year Premium Expenses Interest of increasing and maturity vector reserves (* ) claims 1 1,530 -50 ? ? ? -51 2 1,530 ? ? 21 3 1,530 ? ? 45 The mortality probability at each age is 1%. The rate of interest earned on cashflows and reserves is 6%. Reserves are calculated using an interest rate of 4%. The reserves are zero at the start and end of the contract. The interest earned on the reserve in the third year is $195. (i) Complete the table. (ii) Calculate the internal rate of return. (wii) Explain the effect that changing to a weaker reserving basis would have on the internal rate of return. (iv) Calculate the net present value using a risk discount rate of 7%. (v) Explain the effect that changing to a weaker reserving basis would have on the net present value. (* ) Allowing for interest earned on reserves