Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. If the cost to Alex of searching for an apartment is $30, then searching for another apartment is a gamble with an expected value of:
A. $20.
B. $40.
C. $0.
D. $10.
Answer: D
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A flat tax which does allow deductions for investment spending is a type of
A) investment tax. B) excise tax. C) luxury tax. D) consumption tax.
An example of a positive externality is
a. pollution because it affects people not directly involved with producing it b. a homeowner's maintenance of a beautiful lawn because this creates a benefit for neighbors c. creating a monopoly d. driving a car that emits pollution e. cigarette smoking because this imposes an indirect cost on people around the smoker
If an increase in inflation permanently reduced unemployment, then
a. money would not be neutral and the long-run Phillips curve would slope upward. b. money would not be neutral and the long-run Phillips curve would slope downward. c. money would be neutral and the long-run Phillips curve would slope upward. d. money would be neutral and the long-run Phillips curve would slope downward.
International trade has the potential to
A. increase the availability of goods and services to those nations that export more than they import. B. increase the availability of goods and services to those nations that have an absolute advantage in the production of a good or service. C. increase the availability of goods and services to all nations. D. decrease the availability of goods and services to all nations.