A manager believes there is a 10 percent chance their firm will have to pay $500,000, a 20 percent chance that they will have to pay $400,000 and a 70 percent chance they will be found innocent and pay nothing except the legal fees of $100,000. If the manager chooses to not settle for $230,000 (pay the plaintiff) and to enter the litigation instead, which of the following is true?
A) The manager is risk neutral.
B) The manager is risk averse.
C) The manager is risk intolerant.
D) The manager is a risk lover.
D) The manager is a risk lover.
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If an increase in expected inflation equally raises the nominal interest rate, the expected real interest rate ________ and thus investment demand ________
A) rises, increases B) rises, decreases C) is unchanged, is unchanged D) falls, increases E) falls, decreases
Economist B believes that if tax rates are cut, tax revenue is likely to fall. This economist most likely believes that the percentage decrease in tax rates will ______________________________ percentage rise in the tax base
A) be larger than the resulting B) be equal to the resulting C) be smaller than the resulting D) occur long after the E) a and d
In which of the following countries does health insurance not pay for most preventive care procedures?
A) Canada B) Japan C) the United Kingdom D) the United States
The principle of diminishing marginal product states:
A. the total output produced decreases as the quantity of the input increases. B. the total output produced increases as the quantity of the input increases. C. the marginal product of an input decreases as the quantity of the input increases. D. the marginal product of an input eventually will be negative.