1. Solutions to moral hazard include: Select one: a. allowing property owners to
ID: 2441532 • Letter: 1
Question
1. Solutions to moral hazard include:
Select one:
a. allowing property owners to over insure their buildings.
b. offering salespeople in stores a straight salary rather than a commission on sales.
c. setting up many stores and restaurants that are part of a national chain as franchises, with the owner undertaking quite a lot of risk.
d. diversification.
2. On any particular day, the probability that it will rain is 25% and that you will be sick is 10%. The probability that both happen on the same day is _____%.
Select one:
a. 17.5
b. 1
c. 2.5
d. 0.25
3. If there is a 50% probability that Joseph will earn $10 per hour at his job today and a 50% probability that he will earn $20 per hour today, his expected pay per hour is:
Select one:
a. $20.00.
b. $15.00.
c. $10.00.
d. $12.50.
4. At the end of the 1980s, Lloyd's of London was in severe financial trouble because of:
Select one:
a. terror attacks by the IRA.
b. the war in Iraq.
c. a major recession in Western Europe and the United States.
d. asbestos claims.
5. Which factor is an input in the production of croissants?
Select one:
a. pastry chefs
b. dough mixers
c. ovens
d. flour
6. The expected value of a random variable is:
Select one:
a. the most recent value of that variable.
b. the most frequently occurring value of that variable.
c. the weighted average of all possible values, where the weights on each possible value correspond to the probability of that value occurring.
d. impossible to determine.
7. When some people know things that other people don't know, there is _____; it can _____ economic decisions.
Select one:
a. risk aversion; facilitate
b. blind strategy; delay
c. private information; distort
d. blind trust; diversify
8. If there is a 25% probability that Joseph will earn $10 per hour at his job today and a 75% probability that he will earn $20 per hour today, his expected pay per hour is:
Select one:
a. $15.00.
b. $10.00.
c. $17.50.
d. $20.00.
Explanation / Answer
Answer:
D. diversification
2- On any particular day, the probability that it will rain is 25% and that you will be sick is 10%. The probability that both happen on the same day is _____%.
Answer: C 2.5
3. If there is a 50% probability that Joseph will earn $10 per hour at his job today and a 50% probability that he will earn $20 per hour today, his expected pay per hour is:
Answer: . $10
4- At the end of the 1980s, Lloyd's of London was in severe financial trouble because of:
Answer: d. asbestos claims
5- Which factor is an input in the production of croissants
Answer: d. flour
6- The expected value of a random variable is:
Answer: the weighted average of all possible values, where the weights on each possible value correspond to the probability of that value occurring.
7- When some people know things that other people don't know, there is _____; it can _____ economic decisions.
Answer: b. blind strategy; delay
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