ECO402 Quiz 2 by VUBuddy

Q1. Slope of income consumption curve for an inferior good is:

1. Positive
2. Negative.
3. First positive then negative.
4. First negative then positive.

Q2. For normal goods, Engel curve always have_____ slope.

1. Perfectly inelastic
2. Positive
3. Negative
4. Infinite

Q3. A negative network externality is best described by which of the following:

1. Two-part tariff
2. Price discrimination
3. Bandwagon effect
4. Snob effect

Q4. Assume that two investment opportunities have identical expected values of Rs. 100,000. Investment A has a variance of 25,000 while investment B's variance is 10,000. We would expect most investors (who dislike risk) to prefer investment opportunity:

1. B because it has less risk.
2. A because it has less risk.
3. B because of its higher potential earnings.
4. A because it provides higher potential earnings.

Q5. Which of the following is correct mathematical expression of expected value of two outcomes having payoffs "X1" and "X2", and probabilities of Pr1 and Pr2, respectively?

1. E(X)=Pr1X2 * Pr1X2
2. E(X)=Pr1X1 + Pr2X2
3. E(X)=Pr1X2 / Pr1X2
4. E(X)=Pr1X2 - Pr1X2

Q6. Which of the following assets is almost riskless?

1. Short-term government bonds
2. Common stocks
3. Long-term corporate bonds
4. Shares of a private company

Q7. Which of the following pairs of goods are NOT complements?

1. Petrol and car
2. Pen and ink
3. Margarine and butter
4. Mobile and sim

Q8. If a person shows a preference towards an uncertain income over a certain income with the same expected value, then this person is called as:

1. Risk loving
2. Irrational
3. Risk neutral
4. Risk averse

Q9. Maria has diminishing marginal utility of income. Based on this information, Maria can be considered as:

1. Risk loving
2. Risk neutral
3. Risk averse
4. Irrational

10.

The bandwagon effect corresponds best to which of the following?

1. Negative network externality.
2. External economy.
3. Snob effect.
4. Positive network externality.

Q1. If the cross-price elasticity of demand is -2, it implies that the products are:

1. Inferior goods
2. Unrelated goods
3. Complements
4. Substitutes

Q2. Suppose a college professor opens an academy for coaching classes and hires three additional teachers. The college professor would most likely be considered which of the following factors of production?

1. Capital
2. Entrepreneurship
3. Land
4. Labor

Q3. The cross price elasticity of demand for tennis balls and rackets is -3. This indicates that tennis balls and rackets are:

1. Unrelated goods
2. Complements
3. Inferior goods
4. Substitutes

Q4. Since car and petrol are complements to each other, if price of petrol decrease then it will Shift the:

1. Demand curve of car towards left.
2. Demand curve of car towards right.