If the (steadily decreasing) marginal benefit of another day spent in the hospital is smaller than the (steadily increasing) marginal cost of an additional day spent in the hospital, the
A. net benefit from the hospital stay is maximized.
B. net benefit from the hospital stay must be negative.
C. net benefit from the hospital stay must be increasing.
D. net benefit from the hospital stay must be decreasing.
Answer: D
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Nationwide banking might reduce bank failures due to
A) reduced competition. B) reduced lending to small businesses. C) diversification of loan portfolios across state lines. D) elimination of community banks.
Which of the following would be most likely to improve the standard of living of a less-developed country?
a. Development of strong labor unions. b. More foreign investment, attracted by the expectation of economic and political stability. c. Adoption of trade barriers (higher tariffs and quotas). d. Widespread use of price controls to allocate goods and resources.
Consider the market for capital equipment. Suppose the value of the marginal product of capital equipment increases. Holding all else constant, the equilibrium quantity of capital equipment will
a. increase. b. decrease. c. not change. d. It is not possible to determine what will happen to the equilibrium quantity of capital equipment.
Answer the following statements true (T) or false (F)
1. Arbitrage refers to the buying and selling activities that cause an equalization of the rates of return on assets that have substantially different characteristics. 2. If investors have two identical assets that have different rates of return, the investors will sell the asset with the higher rate of return to buy the asset with the lower rate of return. 3. Arbitrage activities will make the price of the asset with the higher initial return increase, while the price of the asset with the lower return will decrease. 4. Risk in financial economics refers mainly to the chance that an investment could lose value. 5. Diversification is an investment strategy that seeks to reduce the overall risk in an investment portfolio by selecting a group of assets whose risks differ from one another.