Risk diversification refers to the process by which:
A. insurance companies change the risk aversion of their clients.
B. insurance companies reallocate the likelihood of catastrophes happening.
C. people organize themselves in a group to collectively absorb the cost of the risk faced by each individual.
D. risks are shared across many different assets or people, reducing the impact of any particular risk on any one individual.
Answer: D
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Which of the following is a good example of a firm that is not likely to be perfectly competitive?
a. Farmer Joe's wheat. b. Coyote Wile’s beef ranch. c. Captain John's salmon farm. d. Aviator Alan's nonstop airline service from Seattle to Nome.
The government would want the economy to contract when real GDP is
A. Above potential GDP and the price level is falling B. Below potential GDP in the price level is falling C. Above potential GDP and the price level is rising
Price discrimination occurs when stores mark down products for sale.
Answer the following statement true (T) or false (F)
Caroline's hourly wage rate was reduced from $22 to $16. As a result of the wage decrease, Caroline desires to work more hours and take fewer hours of leisure. For Caroline
A. the substitution effect must equal the income effect. B. the income effect dominates the substitution effect. C. the income effect must be zero. D. the substitution effect dominates the income effect.