Why might a lottery winner decide to take a large lump sum payment rather than receive installments of their winnings over time? How does the concept of present value influence this decision?
What will be an ideal response?
A lottery winner might take a lump sum payment in place of installments for a number of reasons. For one, they may be older and not expect to collect all of their payments during their lifetime. They also might want to use the funds for immediate purposes such as starting a business or buying expensive consumption goods. Present value is important in this decision by helping to determine the size of the lump sum payment they should receive. By calculating the present value of the payments the winner is due over their lifetime they can determine the appropriate compensation for forfeiting their future income stream.
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A competitive equilibrium
A) is always economically efficient. B) is efficient only if there is an externality. C) is economically efficient only given some special conditions. D) does not exist without government taxation.
An increase in the price of a good could be caused by a. An increase in supply
b. An increase in demand. c. A decrease in supply and an increase in demand. d. Either b. or c.
If drugs such as marijuana and cocaine were legalized, it would be likely that
a. their prices would decrease. b. there would be a reduction in tainted or poor quality drugs. c. there would be less violence occurring in drug transactions. d. all of the above.
Based on the information in the table, the total amount of bank deposits decreased from ________ to ________ over the course of 1932. Currency held by public (in billions)Reserve-deposit ratioBank reserves (in billions)Money supply (in billions)December 1931$4.590.095$3.11$37.3December 1932$4.820.109$3.18$34.0
A. $32.7 billion; $29.2 billion B. $37.3 billion; $34.0 billion C. $37.3 billion; $32.7 billion D. $34.2 billion; $30.8 billion