Deck 26: Extension F: Review

Question 1

-In the figure above, the demand and supply of high-skilled workers has an H subscript and the demand and supply of low-skilled workers as an L subscript. The quantity of low-skilled labor employed is

A) 6,000 hours per day.
B) 2,000 hours per day.
C) 4,000 hours per day.
D) 5,000 hours per day.

Answer 1

5,000 hours per day.

Question 2

-In the figure above, the demand and supply of high-skilled workers has an H subscript and the demand and supply of low-skilled workers as an L subscript. In the market for low-skilled labor, the equilibrium wage rate is

A) $4.
B) $6.
C) $10.
D) $14.

Answer 2

$4.

Question 3

-Oligopoly differs from perfect competition because a single competitive firm's behavior does not affect the behavior of its competitors while the behavior of a single oligopolistic firm does affect the behavior of its rivals.

Answer 3

True

Question 4

Abigail's Tax Help, is a firm that sells advice to taxpayers. Abigail is considering buying a new computer that costs $1,500. She expects that the computer will generate an additional profit of $1,200 at the end of the first year and $500 at the end of the second year, after which it will be worthless. If the annual interest rate in the next two years is 5 percent, what is the present value of the profit from the computer?

A) $1,596
B) $1,500
C) $1,361
D) $1,654

Question 5

-In the figure above, the demand and supply of high-skilled workers has an H subscript and the demand and supply of low-skilled workers as an L subscript. The quantity of high-skilled labor employed is

A) 2,000 hours per day.
B) 4,000 hours per day.
C) 5,000 hours per day.
D) 6,000 hours per day.

Question 6

-Jennifer has the utility of wealth curve shown in the figure above. She owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. If she does have an accident, her car is worthless. Jennifer would have the same expected utility as she currently has if her wealth was ________ with no risk.

A) $13,500
B) $12,000
C) $4,500
D) $9,000

Question 7

Contests can help explain why

A) the super rich earn vastly more than other people who have similar amounts of human capital.
B) human capital among the poor has been increasing.
C) the world distribution of income is becoming more equal.
D) the average woman earns less than the average man.

Question 8

The big tradeoff is a tradeoff between

A) equity and efficiency.
B) equality and inequality.
C) marginal cost and marginal benefit.
D) monopoly and perfect competition.

Question 9

-Jennifer has the utility of wealth curve shown in the figure above. She owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. If she does have an accident, her car is worthless. What is Jennifer's expected wealth?

A) $15,000
B) $12,000
C) $13,500
D) $9,000

Question 10

-Jennifer has the utility of wealth curve shown in the figure above. She owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. If she does have an accident, her car is worthless. What is Jennifer's expected utility?

A) 60
B) 90
C) 98
D) 50

Question 11

-Jennifer has the utility of wealth curve shown in the figure above. She owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. If she does have an accident, her car is worthless. An insurance company agrees to pay a car owner like Jennifer the full value her car, if the car owner buys the company's insurance policy. The company's operating expenses are $1,000. Jennifer will

A) not buy the company's policy because the minimum premium that the company is willing to accept is greater than the maximum premium Jennifer is willing to pay.
B) buy the company's policy because the minimum premium that the company is willing to accept is lower than the maximum premium Jennifer is willing to pay.
C) buy the company's policy because the minimum premium that the company is willing to accept is the same as the maximum premium Jennifer is willing to pay.
D) not buy the company's policy because Jennifer is risk neutral.

Question 12

-Jennifer owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. An insurance company agrees to pay a car owner like Jennifer the full value her car, if the car owner buys the company's insurance policy. The company's operating expenses are $1,000. What is the minimum insurance premium that the company is willing to accept?

A) $2,500
B) $2,000
C) $1,500
D) $1,000

Question 13

If the interest rate is 5 percent, the present value of $2,000 to be received two years from today is about

A) $2,010.
B) $1,814.
C) $1,905.
D) $1,980.

Question 14

If the interest rate is 5 percent, the present value of $2,000 to be received one year from today is about

A) $2,005.
B) $1,995.
C) $1,905.
D) $2,100.

Question 15

-Jennifer has the utility of wealth curve shown in the figure above. She owns a car worth $15,000, and that is her only wealth. There is a 10 percent chance that Jennifer will have an accident within a year. If she does have an accident, her car is worthless. The maximum amount that Jennifer is willing to pay for auto insurance is

A) $3,500.
B) $2,000.
C) $4,500.
D) $9,000.

Question 16

-In the figure above, the demand and supply of high-skilled workers has an H subscript and the demand and supply of low-skilled workers as an L subscript. In the market for high-skilled labor, the equilibrium wage rate is

A) $6.
B) $4.
C) $14.
D) $10.

Question 17

Abigail's Tax Help, is a firm that sells advice to taxpayers. Abigail is considering buying a new computer that costs $1,600. She expects that the computer will generate additional profit of $1,200 at the end of the first year and $500 at the end of the second year, after which it will be worthless. If the annual interest rate in the next two years is 8 percent, what is the present value of the profit from the the computer?

A) $1,600
B) $1,286
C) $1,540
D) $1,750

Question 18

-In the figure above, the demand and supply of high-skilled workers has an H subscript and the demand and supply of low-skilled workers as an L subscript. The difference in wage rate between low-skilled and high-skilled labor is

A) $8.
B) $10.
C) $4.
D) $14.