Suppose Mark has the option of investing in two different investments that cost $200 each. One promises to earn 5% in compounded interest over the next 5 years. The other promises to earn $255.26 in 5 years. Assume the interest rate is 5%. Which asset will he choose?
What will be an ideal response?
Mark will be indifferent to either asset. Both have future values of $255.26 ([$200 ? (1.05)5] and $255.26) and have the same price. Also their prices are equivalent to their present value. Mark would be willing to choose either asset.
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The figure above shows the market for steel, the production of which creates pollution
a. What point represents the equilibrium price and what point represents the equilibrium quantity in an unregulated, competitive market? b. What area represents the deadweight loss of the unregulated, competitive market outcome? c. What point represents the efficient quantity? d. If the output level in part (c) was achieved through the use of a government imposed tax, what price would consumers pay? What price would the producers receive? What distance represents the amount of the tax? e. If government successfully uses marketable permits to eliminate the external cost, what point represents how much output would be produced?
The text defines persuasion as inducing others to cooperate by
A) either threats or promises. B) employing deception. C) offering people additional options. D) providing monetary payments. E) using verbal arguments.
If the money supply is $20 trillion and velocity is 2, then nominal GDP is
A) $2 trillion. B) $10 trillion. C) $20 trillion. D) $40 trillion.
Refer to Scenario 14.4. Suppose that a pollution tax is imposed on each unit of a firm's output. The number of workers hired
A) will decrease. B) will increase. C) will not change. D) will change in an indeterminate fashion.