You are considering playing a card game. The rules of the game are such that you pick a card from a standard deck of 52 cards and if the card is a diamond, you win $30 . The catch is, you have to pay the dealer a fee of $10 to play the game
What is the expected value of this gamble? (Hint: In a standard deck of cards, ¼ of the cards are diamonds).
A deck of cards consists of 52 cards out of which, 13 are diamonds. Therefore in a random pick, the probability of picking a diamond is 13/52 = 1/4 . When a diamond is picked, the player wins $30, pays the dealer $10, and is left with $20 . The probability of not picking a diamond is 1 – 1/4, or 3/4 . When a diamond is not picked, the player win nothing, pays the dealer $10, and is left with -$10 . Therefore, the expected value of the gamble is (1/4 × $20) – (3/4 × $10) = -$2.50 . Since, the expected value of the gamble is -$2.50 a player loses an average of $2.50 each time he plays the game.
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If the Fed makes an open market purchase of $1 million of government securities, the monetary base
A) is unchanged in size, though its composition changes. B) will decrease by a multiple of $1 million over time. C) will increase by a multiple of $1 million over time. D) is decreased by $1 million. E) is increased by $1 million.
What is the welfare impact of a subsidy policy?
A) Producer surplus increases, consumer surplus declines, and total welfare declines. B) Producer and consumer surplus increase, and these gains are larger than the government cost. C) Producer and consumer surplus increase, and these gains are smaller than the government cost. D) Producer surplus increases, consumer surplus declines, and total welfare increases due to the subsidy program.
The majority of elementary and secondary school expenditures is financed by federal and state income taxes
Indicate whether the statement is true or false
Among the evidence that people do not always make choices that reflect sensible preferences are examples of:
A. choice reversals. B. conformance to the principle of revealed preference. C. compliance with the Ranking Principle. D. All of these provide evidence that people do not always make choices that reflect sensible preferences.