1. If a person is not fully insured against a potential negative shock, A. Her ex-post...

  

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1. If a person is not fully insured against a potential negative shock, A. Her ex-post utility is lower when the shock occurs than when the shock does not occur B. Her ex-post utility is higher when the shock occurs than when the shock does not occur C. Her expected utility is higher than her ex-post utility when the shock does not occur D. Her expected utility is lower than her ex-post utility when the shock occurs E. None of the above 2. Measured returns to education: A. Overestimate the real returns of education, but this has nothing to do with ability bias B. Underestimate the real returns of education, but this has nothing to do with ability bias C. Overestimate the real return of education, because of the ability bias D. Underestimate the real returns to education, because of the ability bias E. Is an unbiased estimate of the real return to education 3. Tatu's income from farming is generally $450. This year, rains came late and on average the village lost $130 per family due to the bad timing. Tatu's realized income was $430. Under village insurance: A. Tatu's consumption is $450 B. Tatu's consumption is $430 C. Since Tatu suffered a negative idiosyncratic shock, she is expected to receive some positive transfers from the insurance pool. D. Since Tatu suffered a positive idiosyncratic shock, she is expected to give some positive transfers from the insurance pool. 4. Limited liability: A. Increases the interest rate that banks charge B. Reduces the incentive to work C. Protects borrowers from the consequence of bad shocks D. All of the above E. None of the above 5. The difference in days of school attended between children randomly assigned to small class size classrooms and those randomly assigned to a large class size classroom is 10 days. The average attendance rate in large classes is 210 days (out of 240 possible days in the year). A. Because of selection bias (i.e., omitted variable bias), the average treatment effect is underestimated in this cross- sectional study. B. Because of selection bias (i.e., omitted variable bias), the average treatment effect is overestimated in this experimental study. C. Small class sizes cut absenteeism by 4.7% in this experimental setting. D. Small class sizes cut absenteeism by 33% in this experimental setting. 1. If a person is not fully insured against a potential negative shock, A. Her ex-post utility is lower when the shock occurs than when the shock does not occur B. Her ex-post utility is higher when the shock occurs than when the shock does not occur C. Her expected utility is higher than her ex-post utility when the shock does not occur D. Her expected utility is lower than her ex-post utility when the shock occurs E. None of the above 2. Measured returns to education: A. Overestimate the real returns of education, but this has nothing to do with ability bias B. Underestimate the real returns of education, but this has nothing to do with ability bias C. Overestimate the real return of education, because of the ability bias D. Underestimate the real returns to education, because of the ability bias E. Is an unbiased estimate of the real return to education 3. Tatu's income from farming is generally $450. This year, rains came late and on average the village lost $130 per family due to the bad timing. Tatu's realized income was $430. Under village insurance: A. Tatu's consumption is $450 B. Tatu's consumption is $430 C. Since Tatu suffered a negative idiosyncratic shock, she is expected to receive some positive transfers from the insurance pool. D. Since Tatu suffered a positive idiosyncratic shock, she is expected to give some positive transfers from the insurance pool. 4. Limited liability: A. Increases the interest rate that banks charge B. Reduces the incentive to work C. Protects borrowers from the consequence of bad shocks D. All of the above E. None of the above 5. The difference in days of school attended between children randomly assigned to small class size classrooms and those randomly assigned to a large class size classroom is 10 days. The average attendance rate in large classes is 210 days (out of 240 possible days in the year). A. Because of selection bias (i.e., omitted variable bias), the average treatment effect is underestimated in this cross- sectional study. B. Because of selection bias (i.e., omitted variable bias), the average treatment effect is overestimated in this experimental study. C. Small class sizes cut absenteeism by 4.7% in this experimental setting. D. Small class sizes cut absenteeism by 33% in this experimental setting.

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The detailed answer for the above question is provided below answer 1 A 2 D 3 B 4 D 5 B Explanation 1 If a person is not fully insured against a poten... View the full answer