Your bike is worth $100 and if you park it outside at school there is a 25% chance that it will be stolen. Your utility function for money is 
. Assume throughout that the bike value and money are interchangeable since you could sell the bike instantly at its value if necessary. What is the maximum you will pay for the bike check-in now?
What will be an ideal response?
If the bike is stolen you have no pleasure. If it is not you have 10,000 units of pleasure. The expected pleasure is therefore 7,500 units. On the other hand you would have that same pleasure if you had $56.25 sure value. Therefore you would pay up to $43.75 for the security service.
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If taxes are cut, there is
A) an increase in aggregate demand and the AD curve shifts rightward. B) a decrease in aggregate demand and the AD curve shifts leftward. C) an increase in the quantity of real GDP demanded and a movement up along the AD curve. D) a decrease in the quantity of real GDP demanded and a movement down along the AD curve. E) no change in aggregate demand, only a change in potential GDP.
By focusing the customers on the price of a product, you make
a. The demand for the product more inelastic b. The customers less price sensitive to the product c. Both A & B d. None of the above
Frictional unemployment depends on _____
a. the age distribution of the population b. the years of work experience of the population c. the education level of the female population d. the ethnicity of the male population
Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000 . What are private saving, public saving, and national saving?
a. -2,000, 1,000, and 2,000, respectively. b. 1,000, 2,000, and 3,000, respectively. c. 2,000, -1,000, and 1,000, respectively. d. 2,000, 1,000, and 2,000, respectively.