Insurance works best in situations where:
a. there is a high probability of a large loss.
b. the level of probability and the size of the loss are irrelevant.
c. there is a high probability of a small loss.
d. there is a low probability of a small loss.
e. there is a low probability of a large loss.
e. there is a low probability of a large loss.
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Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?
A) Demand for dollars will decrease, and supply of dollars will decrease. B) Demand for dollars will increase, and supply of dollars will decrease. C) Demand for dollars will increase, and supply of dollars will increase. D) Demand for dollars will decrease, and supply of dollars will increase.
Two college students, Mary and Maggie, are spending spring break in Florida. Mary buys a cup of coffee each morning at the local Starbucks rather than from one of the local coffee shops. Maggie claims that Mary is irrational because she never purchases Starbucks coffee at home, and Starbucks coffee costs more than the coffee sold by local shops. An economist would most likely explain Mary's
behavior by suggesting that a. Mary's behavior is rational, but Maggie's behavior is clearly irrational. b. Mary's behavior is clearly irrational, but Maggie's behavior is rational. c. the Starbucks brand name suggests consistent quality. d. the advertising by Starbucks in Florida is more persuasive than the advertising by Starbucks in Mary and Maggie's home town.
Another term for the opportunity cost of capital is
A) the normal interest rate. B) the normal rate of return. C) a normal profit. D) a normal wage rate.
A country's newest ruler has decided the country will become self-sufficient and ceases trade with the rest of the world. The likely outcome of this action will be that the country's citizens will be:
A. better off than before only if they have the absolute advantage in the production of most goods they consume. B. better off than before only if they have the comparative advantage in all goods C. forced to consume less than before if they possessed a comparative advantage in the production of a good. D. better off than before if they possess an absolute advantage in the production of a good.