Study Questions: Finance and Economics

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The table given below represents the marginal valuation of a beekeeper (collecting honey) and an orchard farmer (producing mangoes). The beekeeper’s opportunity cost reflects the loss in honey collection resulting from the usage of the same orchard again and again. Table 1

Days usedTotal honey value ($)Marginal honey value ($)Beekeeper's opportunity cost ($)Total value of mangoes ($)Marginal value of mangoes ($) 1181821010
22362177
32752236
43032285
53222324
63312302
73412291

1. Refer to Table 1. What will be the maximum number of days for which the beekeeper would like to stay in the orchard without being compensated for his stay by the orchard owner? a.1 day
b.6 days
c.3 days
d.5 days

ANS:DPTS:1DIF:MediumNAT:Analytic

2. Refer to Table 1. What will be the maximum number of days for which the orchard owner would prefer the beekeeper to stay in his orchard without having to pay any compensation? a.3 days
b.6 days
c.1 day
d.5 days

ANS:B and D!!!PTS:1DIF:MediumNAT:Analytic

3. Refer to Table 1. What would be the maximum number of days for which the orchard owner would wish to keep the beekeeper in the orchard by paying him a compensation which is sufficient to cover the latter’s opportunity cost? a.5 days

b.7 days
c.More than 7 days
d.6 days

ANS:A and D!!!PTS:1DIF:MediumNAT:Analytic

4. Which of the following is an example of a possessory property right? a.The right to use a public park for morning walk.
b.The right to park your car in your garage.
c.The right to enjoy the fragrance of the flowers planted in your neighborhood. d.The right to travel in public transport.

ANS:BPTS:1DIF:MediumNAT:Reflective Thinking

5.Escalators present in a contract must state:
a.at what interval the contract price should automatically change at a fixed rate. b.when the price will change and by what formula the new price will be calculated. c.when the contract should be terminated and how the cost of termination should be shared. d.when the contract should be renewed and the terms governing the renewal.

ANS:BPTS:1DIF:EasyNAT:Analytic

6. Jeanie Reuter and Ruth Oslen are tenants in first and second floor apartments. Jeanie practices her piano lessons in the morning, while Ruth practices aerobics on drum beats at the same time. Further assume that the value of the practice to Jeanie is $10 while the value of aerobic exercises to Ruth is $6. Which of the following is a feasible solution to the problem if the cost of negotiation is zero? a.Ruth will pay Jeanie $6 to make her change the time for piano practice. b.Ruth will pay Jeanie $10 to make her change the time for piano practice. c.Jeanie will pay Ruth $4 to make her change the time for aerobics exercises. d.Jeanie will pay Ruth $6 to make her change the time for aerobics exercises.

ANS:DPTS:1DIF:MediumNAT:Reflective Thinking

7.Which of the following may require the parties to renegotiate certain parts of a contract if market conditions change drastically? a.Termination clause
b.Omnibus clause
c.Adjustment clause
d.Reopener clause

ANS:DPTS:1DIF:EasyNAT:Analytic

8. Which of the following is a legal remedy for a breach of the contract between parties? a.Liquidated damages
b.Imprisonment
c.Unitization
d.Specificity

ANS:APTS:1DIF:EasyNAT:Analytic

9. Which of the following exemplifies specific performance that a court might order from the party in breach of a contract? a.A seller ordered to pay back the price of the commodity to the customer having failed to deliver it on-time. b.A popular singer requested to forgo the fee for her performance at a social fund raising program. c.The owner of a polluting factory ordered to convert his private plot into a public garden. d.A movie director ordered to work with an actress he had previously contracted with,...
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