Deck 1: Economics Concepts

Question 1

The standard economic model assumes people are

A)kind
B)boundedly rational
C)fair
D)selfish

Answer 1

selfish

Question 2

Which of the following statements is correct about behavioural economics

A)it builds upon the standard economic model
B)it does not use the methodology of positive economics
C)it rejects the standard economic model
D)it is the same as economic psychology

Answer 2

it builds upon the standard economic model

Question 3

What is a Nash equilibrium

A)a strategy for each player such that total payoffs are maximized
B)a strategy for a person such that the person maximizes payoff given the strategies of others
C)a strategy that maximizes payoff
D)a strategy for each person such that everyone maximizes payoff given the strategies of others

Answer 3

a strategy for each player such that total payoffs are maximized

Question 4

The permanent increment to future consumption expressed as a fraction of the initial consumption forgone is.....

A)rate of return
B)perpetual rate of return
C)expected return
D)all the above

Question 5

Diversifiable risk can be eliminated by

A)investing in many projects.
B)by holding the stocks of many companies.
C)both a and b
D)none of them

Question 6

Non diversifiable risk affects I. the opportunity cost of capital II. should enter into the risk premium

A)only i
B)only ii
C)both i &ii
D)none of them

Question 7

Several combination of commodities x and y that the economy can produce by fully utilizing all of the fixed amounts of labour and capital with the best technology available is depicted by I. production possibility frontier II. transformation curve III. production possibility curve

A)both i & ii
B)both ii & iii
C)both i & iii
D)all the above

Question 8

Who opined that economic growth meant bringing W closer to W*

A)walras
B)adamsmith
C)bentham
D)pareto

Question 9

Who argued that welfare is improved when 'the greatest good (is secured) for the greatest number'

A)walras
B)adamsmith
C)bentham
D)pareto

Question 10

Which criterion refers to economic efficiency which can be objectively measured

A)'cardinalist' criterion
B)bentham's criterion
C)the pareto-optimality criterion
D)the kaldor-hicks 'compensation criterion'

Question 11

The sum of forgone interest and depreciation costs the machine's owner must pay is the

A)competitive rental rate
B)capital asset pricing
C)risk premium
D)all of the above

Question 12

The marginal conditions must be satisfied for the attainment of a Pareto-efficient situation in an economy :

A)efficiency in exchange
B)efficiency of production
C)efficiency in the product-mix, or composition of output
D)all the above

Question 13

Points where the slopes of the isoquants are equal

A)indifference curve
B)contract curve
C)production possibility curve
D)edgewoth box

Question 14

The set of all Pareto efficient allocations in an Edgeworth box diagram is called the

A)indifference curve
B)contract curve
C)production possibility curve
D)edgewoth box

Question 15

A scientific paper titled "The Tragedy of the Commons" was written by

A)walras
B)kaldor
C)garrett hardin
D)pareto

Question 16

A negative externality from consumption occurs if there is a

A)bandwagon effect
B)snob effect
C)veblen effect
D)all the above z

Question 17

The tragedy of the commons results in

A)overconsumption
B)under investment
C)depletion of the resource
D)all the above

Question 18

An important mechanism through which sellers and buyers deal with the problem of asymmetric information is

A)market signalling
B)insurance markets
C)moral hazard
D)principal-agent problem

Question 19

The concept of market signalling was first developed by

A)michael spence
B)kaldor
C)garrett hardin
D)pareto

Question 20

Non diversifiable risk arises because

A)a firm's profits tend to depend on the overall economy
B)a firm's profits tend to depend on that firm only
C)both a & b
D)none of them

Question 21

The risk premium for a capital investment by comparing the expected return on that investment with the expected return on the entire stock market is measured by

A)diversifiable risk
B)non diversifiable risk
C)capital asset pricing model
D)none of the above

Question 22

The quantity of present goods that must be forgone to increase future consumption by 1 unit is called

A)the relative price of future goods
B)indifference curve
C)production possibility curve
D)contract curve