uncertainty

 Expected income for the first year is: 

• highest in accounting. 

• highest in mathematics. 

• higher in English than in mathematics. 

• higher in political science than in economics. 

• highest in economics. 

Ranked highest to lowest in expected income, the majors are:

• economics, accounting, English, mathematics, political science.

• mathematics, English, political science, accounting, economics.

• economics, accounting, mathematics, English, political science.

• English, economics, mathematics, accounting, political science.

• accounting, English, mathematics, political science, economics.

The information in the table below describes choices for a new doctor. The outcomes represent different macroeconomic environments, which the individual cannot predict.

Refer to Table 5.3. The expected returns are highest for the physician who:

• works for an HMO.

• opens her own practice.

• does research.

• either opens her own practice or does research.

• either works for an HMO or does research.

In Table 5.3, the standard deviation is:

• highest for the HMO choice, and it is $76,000.

• lowest for the HMO choice.

• higher for owning one's own practice than for going into research.

• higher for the HMO choice than for going into research.

Refer to Scenario 5.5. The expected cost to the firm if it does not fix the car is:

• $0.

• $24 million.

• $7.9 million.

• $2 million.

• $3.6 million.

Other things equal, expected income can be used as a direct measure of well-being:

• always.

• no matter what a person's preference to risk.

• if and only if individuals are not risk-loving.

• if and only if individuals are risk averse.

• if and only if individuals are risk neutral.

A person with a diminishing marginal utility of income:

• will be risk averse.

• will be risk neutral.

• will be risk loving.

• cannot decide without more information

Blanca would prefer a certain income of $20,000 to a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. Based on this information:

• we can infer that Blanca neutral.

• we can infer that Blanca is risk averse.

• we can infer that Blanca is risk loving.

• we cannot infer Blanca's risk preferences.

Refer to Scenario 5.6. The expected utility of income from research is:

• u($275,000).

• u($95,000).

• [u($500,000) + u($50,000)]/2.

• .1 u($500,000) + .9 u($50,000).

• dependent on which outcome actually occurs.

Refer to Scenario 5.6. The utility of expected income from research is:

• U($275,000).

• [U($500,000) + U($50,000)]/2.

• U($95,000).

• .1U($500,000) + .9U($50,000).

• dependent on which outcome actually occurs.