There are two states of the world. The person receives $100 in state one which occurs with probability 0.6. If the person is rational and their expected return is $80, then in state two the person must receive

a. $20
b. $25
c. $50
d. $100


c. $50

Economics

You might also like to view...

One way a government can eliminate a market failure

A) is to regulate the price so that it equals marginal cost. B) is to implement a price floor equal to marginal cost. C) is to regulate the price so that it is below average cost. D) None of the above solutions will eliminate a market failure.

Economics

Which of the following is an incorrect observation? a. Import tariffs benefit domestic producers and the government, but harms domestic consumers

b. Gains from trade in terms of world output are reduced by export subsidies. c. The overall domestic employment effects of a tariff imposition are likely to be positive. d. If the imposition of a tariff leads to retaliatory tariffs by other countries, domestic employment outside the industry gaining the tariff protection would likely suffer.

Economics

Which of the following correctly describes the federal budget?

a. The federal budget is a plan that describes Fed's monetary policy for the current financial year. b. The federal budget is an aggregate profit and loss statement for all of the nation's business firms. c. The federal budget is the sum of the spending plans of the 50 states. d. The federal budget is a plan for federal government outlays and revenues for a specified period, usually a year.

Economics

Suppose when the price of pineapples goes from $5 to $3 per pineapple, production decreases from 3,500 pineapples to 2,000 pineapples per year. Using the mid-point method, the percentage change in price would be:

A. 0.50 B. 54 percent C. -50 percent D. 0.54

Economics