These questions cover aspects of the "new" material that is relevant for the final exam. There's probably not much need to again explain how this page work. Remember that the sample questions for Exams #1-4 are still available. [The final, of course, is comprehensive.]

1. How is the Marginal Revenue Product of a unit of a input computed?   [answer and explanation]
   
   1. MRP = marginal product (measured as units of output produced for each additional unit of input used) × price (of input).
   2. MRP = marginal product (measured as units of input used for each additional unit of output produced) × price (of input).
   3. MRP = marginal product (measured as units of output produced for each additional unit of input used) × price (of output).
   4. MRP = marginal product (measured as units of input used for each additional unit of output produced) × price (of output).

   Workers	Output
   1	60
   2	110
   3	150
   4	180
   5	200
   6	210

2. The accompanying table contains information on the total number of units of output that a firm (given the other inputs it has available) is able to produce each day based on the number of workers it employs.
   The firm's output can be sold for $4 a unit; it costs the firm $110 a day to hire a worker. This firm would maximize its profits by hiring _____ workers.   [answer and explanation]
   
   1. 1
   2. 2
   3. 3
   4. 4
   5. 5

3. Margaret has decided to increase the numbers of hours that she works. This change was due only to a change in the wage that Margaret receives for each hour worked. Since Margaret has chosen to work more hours, we can be sure that Margaret's hourly wage must have _____.   [answer and explanation]
   
   1. increased
   2. decreased
   3. stayed the same
   4. Knowing only that Margaret has increased her work hours isn't enough to tell us whether her hourly wage rose or fell.

4. Consider the following two situations. (i) Andy's parents both died at age 110; Bobbi's parents both died at age 60. An insurance company offers a policy that pays a person $25,000 for every year he or she lives past 65. Andy is much more eager to buy this policy than is Bobbi. This situation illustrates _____. (ii) Sam owns some valuable jewels and a safe in which to store them. After buying burglary insurance, Sam begins to leave home without putting the jewels inside the safe. Sam's behavior illustrates _____.   [answer and explanation]
   
   1. adverse selection   ;   moral hazard
   2. moral hazard   ;   adverse selection
   3. adverse selection   ;   adverse selection
   4. moral hazard   ;   moral hazard

5. Person A possesses characteristic X. Person C, who is an employer, thinks this characteristic is very important, and is willing to pay a lot to hire somebody who has the characteristic. Person B does not possess characteristic X. Person B, though, would like to be hired (and to be paid a lot), so B would like C to believe that he does in fact possess the characteristic. In other words, A really has characteristic X, while B only has a reason to pretend that he has characteristic X. If A wants to credibly establish that he really possesses characteristic X, he has an incentive to employ a ____ device; for this device to do what A wants it to do, it must be ____ expensive for A to employ the device than it is for B to employ it.   [answer and explanation]
   
   1. signaling   ;   more
   2. signaling   ;   less
   3. screening   ;   more
   4. screening   ;   less

   Number of Voters	Desired Spending
   250	$20,000
   500	$40,000
   1000	$60,000
   1000	$80,000
   750	$100,000
   500	$125,000
   500	$150,000
   300	$175,000
   200	$200,000

6. The 5000 voters that live in a certain city are concerned about only one issue -- how much money should be spent buying books for the local library. Each of the voters in the town has an opinion about the best level of spending. The accompanying table shows the number of voters who believe that each spending level is most desirable. [Assume that each voter would prefer the amount spent to be as close as possible to his or her most-desired level.] If two candidates (each of whom only wants to get elected) are running for mayor, and if each voter casts his or her own vote based only on his or her preferences on this one issue, we would expect _____.   [answer and explanation]
   
   1. both candidates to support spending $100,000
   2. both candidates to support spending $94,000
   3. both candidates to support spending $80,000
   4. one candidate to support spending $80,000 and the other to support spending $100,000
   5. one candidate to support spending $80,000 and the other to support spending $120,000