Federal Reserve Bank of Boston Economic Quiz
1. A test for a particular genetic condition present in a tenth of a percent of the population gives the correct diagnosis for a given subject 99 percent of the time. You take the test and it diagnoses that you have the condition. What is the probability that you actually have the condition?
a) Less than 25 percent
b) Between 25 and 50 percent
c) Between 50 and 99 percent
d) 99 percent
2. Suppose you've won the right to bid for a gold mine. You don't know exactly how much gold is in the mine, but you do know its worth some whole million dollar value between $0 and $100 million to the owner. Each of those outcomes is equally likely as far as you know, although the owner knows the true value. You also know that because of your superior managerial abilities, the mine will be worth 50 percent more to you than it is to the owner. You are allowed to make one take-it or leave-it bid to the owner. Which of the following bids offers you the most expected profit?
3. Suppose you’re deciding when over the next seven days to do your laundry, and you base your decision on maximizing the total net units of happiness (called utils) that you earn over the seven days. You make the decision whether to do laundry each morning, and you get 100 utils per day you have clean laundry. So if you do laundry on the first morning, you get 700 utils for the week, and 0 utils if you never do it. The actual cost of during laundry on any morning is always 150 utils. When making your laundry decision each morning, you always correctly perceive the actual cost of doing laundry today as 150 utils, but you always incorrectly perceive that the cost of doing laundry on any future day will be just 25 utils. When will you do your laundry?
a) The 1st day
b) The 2nd day
c) The 7th day
4. Suppose you had the opportunity to play a lottery every day with a 51 percent chance of winning $1 and a 49 percent chance of losing $1. What is the probability that you end up as a net loser if you play this game every day for 20 years?
a) Less than 33 percent
b) Between 33 and 49 percent
c) 49 percent
d) Greater than 49 percent
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Economic quiz written by: David DeRemer - February 2005