If an individual moves money from currency to a demand deposit account
A) M1 decreases and M2 stays the same.
B) M1 stays the same and M2 increases.
C) M1 stays the same and M2 stays the same.
D) M1 increases and M2 stays the same.
C
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Rational production decisions require an understanding of
A. trade-offs. B. opportunity costs. C. scarcity of resources. D. All of the responses are correct.
The short and long run market supply curves:
A. are equivalent. B. may differ because the set of firms that are able to produce in a market may change. C. may differ due to barriers to entry in the long run. D. do not intersect.
Near the end of the eighteenth century, the dollar:
a. was a nickname for the Spanish Peso. b. was more plentiful than any other coin. c. was customarily used to reckon accounts. d. All of the above are correct.
A businessman is confronted with the following opportunity. He can invest $10,000 in a project that will either succeed wildly, fail miserably, or simply pay him back his $10,000. If wildly successful, the project will earn the businessman $110,000, but if it fails he will not get any money back.
i. If the businessman is risk neutral and he feels that there is a 1/2 chance of miserable failure, then what is the minimum probability of wild success required for him to want to invest in the project? ii. Based on the probability that you derived in part i, explain what you know about the minimum probability that would be required by a risk averse businessman.