Distinguish between risk that can be reduced through diversification and risk that cannot be reduced through diversification
What will be an ideal response?
Risk that cannot be diversified away affects all investments equally. Examples would include war and natural disasters. Risk that can be reduced through diversification includes changes to the value of an investment that is not perfectly positively correlated with the values of other investments.
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The market for unskilled labor is illustrated in the figure above. The market is in equilibrium and then a minimum wage of $3 per hour is imposed. Unemployment will equal
A) 0 hours. B) 10 million hours per year. C) 20 million hours per year. D) 30 million hours per year.
Refer to the above table. If the price is $5, the perfectly competitive firm should produce
A) 104 units. B) 105 units. C) 106 units. D) 107 units.
Which of the following would be a concern of normative economics?
a. measuring the actual distribution of income in the economy b. recommending a change in government policy to make the distribution of income more equitable c. determining the impact of higher income taxes on the distribution of income d. determining the impact of a lower federal budget deficit on the distribution of income e. measuring the change in the nation's income distribution since 1960
A weakness of the market system of resource allocation is that
a. such economies tend to be stagnant b. most participants in such an economy have low standards of living c. there are no limits on an individual's freedom of action d. it does not address the problem of initial inequities in endowments e. its participants are free to act according to their desires