Suppose Dean has $500 and there are two companies he could invest X dollars in: Dog Gone Salon, which has a payoff of 2X with 50% probability and $0 with 50% probability and Pretty Kitty Grooming, which has a payoff of 4X with 25% probability and $0 with 75% probability. Dean's expected payoff from investing in Dog Gone Salon only is:
A. $1,000.
B. $500.
C. $0.
D. $1,500.
B. $500.
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The simple circular flow of income shows that the total income in an economy equals
A) all taxes paid by households. B) total expenditures. C) the total amount of money supplied by the government. D) total profits earned by firms.
If a firm decides to ignore the reactions of its rivals to its policies, the appropriate model to analyze its behavior is
A. game theory. B. perfect competition. C. monopoly. D. cartels.
The desire for goods and services is
a. created by a market economy b. the ultimate explanation for all production c. why it is so difficult to explain how our economy works d. the cause of inflation e. what causes the market wage for labor to continually increase
Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted, and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake, it will cost $1,200 and generate social benefits of $1,500 . However, Wisconsin will receive only $1,100 of those social benefits, while neighbor Illinois will receive the other $400 . If Illinois cleans the lake, it will
cost $700 and generate social benefits of $900 . However, Illinois will receive only $600 of those benefits, while Wisconsin will receive the remaining $300 . If either state does not clean the lake, it experiences a cost of $0 . If Wisconsin does not clean the lake and Illinois does, then _____. a. Wisconsin gains $200 and Illinois gains $100 b. Wisconsin gains $200 and Illinois loses $100 c. Wisconsin gains $300 and Illinois loses $100 d. Wisconsin gains $300 and Illinois gains $100