Ashwini is thinking of buying travel insurance (which pays her if she needs to cancel her trip) for her trip to Cancun over spring break. There is a 5 percent chance that she will need to cancel her trip
Without insurance she would lose the full $2,000 price of the trip; with insurance she would get a full refund of $2,000. The premium for this insurance is $105. Which of the following is CORRECT? I. The expected value of Ashwini's loss is $100. II. If Ashwini is risk averse she is willing to buy the insurance only if its price is less than $100. A) I only
B) II only
C) I and II
D) neither I nor II
A
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A payroll tax is also known as a(n) ________ tax
A) excise tax B) corporate income tax C) personal income tax D) social insurance tax
The interest rate that banks pay for borrowing overnight from other banks is called:
a. bank rate. b. target rate. c. federal funds rate. d. real interest rate. e. prime lending rate.
Other things being constant, when a firm sells new shares of stock, the
a. supply of the stock increases and the price decreases. b. supply of the stock decreases and the price increases. c. demand for the stock increases and the price increases. d. demand for the stock decreases and the price decreases.
Normal profit
A. Is the accounting profit earned when economic profits are greater than zero. B. Covers the full opportunity cost of the resources used by the firm. C. Is an above-average rate of return. D. Is sufficient to induce entry into the industry.