Diversification reduces
a. only market risk.
b. only firm-specific risk.
c. neither market or firm-specific risk.
d. both market and firm-specific risk.
b
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Suppose milk and cereal are compliments and the demand for milk is Qdm = 40 - 6Pm - 2Pc, where Qdm stands for millions of gallons of milk demanded, Pm stands for the price of milk and Pc stands for the price of cereal. The supply of milk is Qsm = 6Pm - 8, where Qsm stands for millions of gallons of milk supplied. The demand and supply of cereal are Qdc = 90 - 5Pc - Pm and Qsc = 5Pc - 10, respectively, where Qdc stands for millions of boxes of cereal demanded and Qsc stands for millions of boxes of cereal supplied. Suppose the government imposes a $2.00 per gallon tax on milk. The formula for the market-clearing curve for milk after the tax is:
A. Pm = 4 - (Pc/6). B. Pm = 5 - (Pc/6). C. Pm = 5 + (Pc/6). D. Pm = 2 - (Pc/6).
A 2009 Chevrolet model has more horsepower than the 2008 version and is included in the BLS basket of goods. BLS attempts to account for this change in the market basket by
a. dropping the good from the basket. b. substituting in a different vehicle with the same horsepower as the 2008 model. c. adjusting the share of the market basket allocated to transportation. d. adjusting the price of the good to account for the quality change.
One disadvantage of using the government to provide pure public goods is that everyone receives ________ of the public good and has ________ for the public good.
A. the same amount; a different reservation price B. a different amount; the same reservation price C. the same amount; the same reservation price D. a different amount; a different reservation price
Consider the following payoff matrix facing two firms selling the same product in the same market. They must choose whether to price the good at a high or low price. COMPANY B Low PriceHigh PriceCOMPANY A Low PriceA: 2, B: 2A: 4, B: 1 High PriceA: 1, B: 3A: 6, B: 2Given this information:
A. A has a dominant strategy but B does not. B. B has a dominant strategy but A does not. C. both A and B have dominant strategies. D. neither A nor B has a dominant strategy.