Obi-Wan is considering whether to buy a lightsaber. With probability 0.50 he will value the lightsaber at $4,000, and with probability 0.50 he will value it at $1,000. If new lightsabers sell for $2,500, then buying a new lightsaber is a:
A. fair gamble.
B. less-than-fair gamble if Obi-Wan risk neutral.
C. less-than-fair gamble.
D. better-than-fair gamble.
Answer: A
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The average total cost of production
A) equals total cost of production multiplied by the level of output. B) is the extra cost required to produce one more unit. C) equals the explicit cost of production. D) equals total cost of production divided by the level of output.
Suppose you are producing where MC = AVC = $3 and this is loss minimizing. If market reports predict that the price of your product will reach a long-run equilibrium level that is $4 higher than it is today, you should
a. increase output in advance of the expected price increase b. remain in business c. shut down d. remain in business only if your most efficient production level has an average total cost less than or equal to $7 e. shut down until the price increases, then get back in business
Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005 . However, the inflation rate was lower between 2004 and 2005 than it was between 2003 and 2004 . Which of the following scenarios is consistent with this assumption?
a. The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. b. The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. c. The CPI was 100 in 2003, 105 in 2004, and 130 in 2005. d. The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.
Starting from a long-run equilibrium, an increase in government expenditures increases output in the short run but not in the long run.
Answer the following statement true (T) or false (F)