Suppose Brandon's indifference curves are defined as U = (3/4)?FS + (1/4)?FH, where FS is consumption during sunny weather and FH is consumption during a hurricane. Further suppose Brandon receives 64 units of food when it is sunny and 16 units when there is a hurricane. What is the certainty equivalent of the expected food consumption bundle if the probability of sunshine is ? = 0.75?
A. 49 units of food
B. 52 units of food
C. 7 units of food
D. 25 units of food
A. 49 units of food
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Optimization in differences analyzes:
A) the total net benefits of the alternative that looks the most attractive. B) the change in the net benefits resulting from a shift from one alternative to another. C) only the costs of an alternative and not the benefits. D) the total net benefits of different alternatives.
The “law” of diminishing returns asserts that marginal returns will ultimately diminish when the quantity of one input is increased.
Answer the following statement true (T) or false (F)
You own a tract of trees and are deciding whether to harvest them now or next year. If you harvest them now, you can invest the proceeds and get a return of 5% on your investment. What should you do?
a. Let the trees grow as long as their dollar worth increases by more than 5% b. Let the trees grow c. Cut down the trees, and sell them d. Let the trees grow as long as their dollar worth increases by less than 5%
If Sam is willing to pay $50 for one good X, $30 for a second, $20 for a third, $8 for a fourth, and the market price is $10, then Sam's consumer surplus is:
a. $10 b. $40. c. $70 d. $100.