Mid term Exam 1 2324

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Seneca College *

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Economics

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Feb 20, 2024

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Mid term Exam 1 (2023-24) 1. Decision Theory Basics  In the context of decision-making under uncertainty, which of the following represents the expected utility theory assumption? a) Decision-makers are risk-averse. b) Decision- makers maximize their expected utility. c) Decision-makers prefer lower rewards. d) Decision-makers' choices are independent of their wealth levels. 2. Preference Relations  Which of the following conditions is necessary for a preference relation to be considered transitive? a) If a is preferred to b and b is preferred to c, then c is preferred to a. b) If a is preferred to b, then b must be preferred to a. c) If a is preferred to b and b is preferred to c, then a must be preferred to c. d) Preferences between options must remain constant over time. 3. Rational Choice Theory  According to rational choice theory, which of the following is true about individual preferences? a) They must be asymmetric. b) They need to be transitive and complete. c) They should prioritize social welfare over individual gain. d) They are mostly influenced by external pressures. 4. Utility Functions  Which statement about utility functions is correct? a) They represent the ordinal ranking of preferences. b) They quantify the satisfaction a consumer derives from different bundles of goods. c) They are used to calculate the total cost of a project. d) They decrease with an increase in the consumption of goods. 5. Expected Utility  What does the expected utility model assume about decision- makers? a) They are risk-neutral. b) They always prefer the option with the highest possible payoff. c) They evaluate uncertain prospects by their expected values. d) They disregard potential outcomes when making decisions. 6. Linear Regression Analysis  In a simple linear regression model, what does the slope coefficient represent? a) The variance of the dependent variable. b) The expected change in the dependent variable for a one-unit increase in the independent variable. c) The correlation between the dependent and independent variables. d) The intercept of the regression line. 7. Statistical Significance  Which statement best describes the concept of statistical significance in hypothesis testing? a) It confirms the truth of the hypothesis being tested. b) It indicates the likelihood that the observed results are due to chance. c) It measures the

effect size of the independent variable on the dependent variable. d) It provides a qualitative assessment of the data. 8. Risk and Uncertainty  Under conditions of uncertainty, how do risk-averse individuals make decisions? a) By choosing the option with the minimum expected loss. b) By selecting the alternative with the highest variance. c) By maximizing their minimum gain. d) By ignoring potential risks and focusing on potential gains. 9. Ordinal and Cardinal Utility  Which statement correctly differentiates between ordinal and cardinal utility? a) Ordinal utility allows for exact measurements of satisfaction, while cardinal utility does not. b) Cardinal utility can rank preferences but cannot measure the magnitude of utility differences. c) Ordinal utility involves ranking preferences without measuring satisfaction levels. d) Both ordinal and cardinal utilities assume constant marginal utility of consumption. 10. Game Theory  In the context of game theory, what is a Nash Equilibrium? a) A situation where one player's gain is equivalent to another's loss. b) A scenario where no player can benefit by changing strategies while the others keep theirs unchanged. c) A condition where all players adopt a cooperative strategy to maximize collective payoff. d) An outcome where players' strategies lead to unequal payoffs.

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