All of the following are true regarding cartels except which one?
A) They are stable.
B) They create a deadweight loss.
C) They are illegal.
D) They set the price higher than the competitive price.
A) They are stable.
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In the aggregate expenditures model, if an economy operates below equilibrium GDP, there will be:
a. unplanned inventory depletion. b. unplanned inventory accumulated. c. a decrease in GDP. d. a decrease in employment.
A firm's isoprofit curve is defined as the combinations of outputs produced by:
A. all firms that yield the firm the same level of profit. B. all firms that make total industry profits constant. C. a firm that earns it the same level of profits. D. None of the answers is correct.
Suppose, after undergoing genetic testing, you discover that you have a health condition that could result in the emergence of a disability which would make it impossible for you to continue to work. The probability of this happening is 50%. Currently your expected lifetime earnings are $5,000,000, but if the disability hits, your expected lifetime earnings will consist primarily of income earned from government support programs -- and will not add up to more than $1 million.
a. Suppose your tastes are state-independent and the function 
can be used to
represent your tastes in the expected utility form. Are you risk averse?
b. What is the highest premium you would pay to get fully insured?
c. What is the equation (in terms of 
-- consumption in the bad state -- and 
-- consumption in the good state) that defines the full menu of actuarily fair insurance contracts?
d. Set up the optimization problem that you would solve as you choose among actuarily fair insurance contracts.
e. Solve the optimization problem. What does this imply will be the insurance contract (b,p) that you buy -- where b is the benefit level and p is the insurance premium?
f. Finally, suppose you had state dependent tastes and that the functions 
and 
allowed us to use the expected utility form to represent your tastes. How does your answer to (e) change?
What will be an ideal response?
The Agricultural Adjustment Act, passed in 1933, was an effort to
a. keep agricultural prices high by increasing supply. b. keep agricultural prices low by increasing supply. c. keep agricultural prices high by decreasing supply. d. keep agricultural prices low by decreasing supply.