An individual will be considered risk neutral if:
a. he is indifferent between taking and not taking up the gamble.
b. he pays someone to take away the gamble from him.
c. he pays someone to allow him to take the gamble.
d. he takes up the gamble under any situation.
A
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An example of a market failure is when:
A. one person’s consumption of a good imposes costs on others B. a firm selling a product faces competition from many other sellers. C. a good is priced too high for poor families to afford. D. the distribution of surplus is unfair.
In a public corporation, asymmetric information often results in a principal-agent problem between top management and ownership. What information would help to prevent this principal-agent problem?
What will be an ideal response?
The goals of bank asset management include
A) maximizing risk. B) minimizing liquidity. C) lending at high interest rates regardless of risk. D) purchasing securities with high returns and low risk.
Refer to the table below. Busy Betty sells her cakes for $20 each and her constant marginal cost to produce each cake is $12, which is equal to her (constant) average total cost. If she does not sell a cake the day she makes it, she sells it as day-old cake for $10. What is her expected marginal cost of holding the 20th cake in inventory?
The above table shows the probability distribution of cake sales at Busy Betty's Bakery.
A) $0.40
B) $10.00
C) $0.20
D) $2.00