Econ 102 Exam 3 Version A PDF

Exam 3 ($1,800) Version A Econ 102 You may use a simple calculator on this exam, but no outside notes. There are 21 total questions on this exam, each worth the same amount. All scratchwork must be done on this exam. Th...

Exam 3 ($1,800) Version A Econ 102 You may use a simple calculator on this exam, but no outside notes. There are 21 total questions on this exam, each worth the same amount. All scratchwork must be done on this exam. The entire back page is completely blank for this purpose. You must clearly label your graphs. Be sure to label your scantron with your version, name, and your ID number, and fill out your scantron with pencil only. Only fill out the first 14 questions on the scantron. Name: 1 Page intentionally blank 2 1. A concert that has plenty of room for everyone to enjoy is what kind of good? (a) Nonrival and nonexcludable (b) Rival and nonexcludable (c) Nonrival and excludable (d) Rival and excludable 2. Which of the following is the most accurate classification of someone in poverty? (a) Someone who is in the bottom 20% of income earners in their country. (b) Someone who is in the bottom 80% of income earners in their country. (c) Someone who is in the top 10% of income earners in their country. (d) Someone who cannot afford a computer and internet on their current salary. (e) Someone who cannot afford to pay rent and eat on their current salary. 3. A person who exhibits the hot hand fallacy: (a) is more likely to take a risky gamble that has a negative expected payoff. (b) is more likely to take a safe option over a gamble that has a higher expected payoff. (c) is more likely to take a gamble after that same gamble has failed recently. (d) is more likely to take a gamble after that same gamble has succeeded recently. 4. The free-rider problem arises (a) When people feel their contribution is so small relative to the total amount needed that it won’t make a difference whether they contribute or not. (b) When people realize they will still receive the benefits of a good whether they pay for it or not. (c) Whenever the government produces a good or service. (d) Whenever there is a surplus of the product in the market. 3 5. Credit card companies give big bonuses and incentives for people to sign up in the hopes that people will either overspend on their credit card and get charged a fee, or forget to pay back credit cards and get charged a high interest rate. This is an example of firms abusing: (a) difficulty with intertemporal decision-making (b) bias in favor of the status quo (c) the role of framing effects (d) the role of priming effects (e) guilt aversion 6. A sneaker store offers a limited time print run of sneakers that they will only offer for a month and then never again. This is attempting to take advantage of (a) Guilt Aversion (b) Inequality Aversion (c) Regret Aversion (d) all of the above 7. Upon graduation, Britney had two job offers. The jobs were identical in every way with two exceptions. One job was located in Ft. Lauderdale, FL and offered an annual salary of $95,000. The other job was located in Tulsa, OK and offered an annual salary of $72,000. All else equal, the salary difference is due to: (a) The firm in Florida had a lower demand for workers than the firm in Oklahoma (b) Compensating Differentials (c) Discrimination (d) Transfer Payments 8. (QUESTION REMOVED) Which of the following refers to the amount of money that must be paid by a consumer before they can receive any benefits with their insurance plan? (a) Copay (b) Deductible (c) Premium (d) Co-insurance Payments 4  9. For a nation’s income, Germany’s Gini coefficient is.28 while the US has a Gini coef- ficient of.47 in 2022. Which of the following is true based on this information? (a) Germany has more wealth inequality than the United States (b) Germany has lower levels of discrimination relative to the US. (c) Germany has less wealth inequality than the United States (d) Germany has higher levels of discrimination relative to the US 10. Suppose that there are three gambles: Gamble A has a.75 chance of $12 and a.25 chance of $4. Gamble B has a.5 chance of $10 and a.5 chance of $6. Gamble C has a.1 chance of $100 and a.9 chance of $0. Which gamble has the highest expected value? (a) Gamble A (b) Gamble B (c) Gamble C (d) Gambles A & C (e) Gambles A & B 11. If there are external costs of production not accounted for, then marginal (a) cost equals marginal social cost. (b) cost is less than marginal social cost. (c) cost is greater than marginal social cost. (d) social cost is zero. 5 12. Humans eventually have diminishing marginal utility with respect to any good. (a) True (b) False 13. Which of the following most accurately describes where a person maximizes their utility (within their budget constraint)? (a) Maximizing consumption of all goods. (b) The marginal utility is equal for every item. (c) The total utility is equal for every item. (d) The marginal utility per dollar spent is equal for every item. (e) The total quantity purchased of the most desired item is maximized. 14. (QUESTION REMOVED) Which of the following is NOT a reason that healthcare spending is so high in the US? (a) Patents and protections on life-saving drugs that give monopoly power to phar- maceutical companies. (b) Demand for healthcare is inelastic and supply of healthcare services is limited. (c) Asymmetric information in insurance markets. (d) Some firms force every worker working at the company to buy health insurance through their insurance provider that they work with. (e) None of the above 6 15. After purchasing car insurance, a person drives more dangerously. How could an insurance company disincentivize this kind of behavior? 16. Suppose that a firm is selling insurance. There are two potential customers: A low risk customer who spends $100 a month on insurance, and a high risk customer who spends $500 a month on insurance. From the insurance company perspective, there is a 21 chance of a low risk customer and a 12 chance of a high risk customer. Due to the competitiveness of a market, any insurance company that sells insurance at a higher price than any other firm will not sell insurance, and so a firm will attempt to sell insurance that is ’fair.’ What kind of customers will be able to buy insurance, and what would the price of insurance be? 7 17. Consider the following problem that is similar to the Monty Hall problem: There are four doors. Behind one door is a car, and behind the other three are donkeys. The car is equally likely to be behind any door. Initially, you choose a door. After you choose a door, the host reveals 2 of the doors that you did not choose that contain a donkey. After revealing both doors, the host asks you if you want to switch your choice of door or stay with the same door. What is the probability of winning if you switch doors? 18. Suppose that the economy below has a negative externality. Draw an example of a change in supply or demand that would get this economy to the social optimum. P 10 9 S 8 7 6 5 4 3 2 1 D Q 0 1 2 3 4 5 6 7 8 9 10 8 19. Suppose that Emily gets the following marginal utility from items: Number of Marginal Utility Marginal Utility Goods of Fishing Gear of Pillows 1 200 300 2 160 270 3 120 210 4 80 150 5 40 90 6 0 0 7 -40 -90 8 -80 -180 Suppose that Fishing Gear is $2 each while Pillows are $3 each, and that Emily has $12 to spend. What is the utility maximizing bundle that is within Emily’s budget? 9  For the next two questions, Suppose that a person has a choice between two gambles: One that has a 100% chance of some middling outcome (option A), and another that has a 50% of a high value outcome, and a 50% chance of nothing (option B). 20. Would a person being risk averse impact their likelihood of choosing option A? Why or why not? 21. Would a person falling victim to the Allais’ paradox impact their likelihood of choosing option A? Why or why not? 10 Page intentionally blank 11