Continuing with the same family from the preceding question, suppose a risk neutral insurance company exists to provide vacation insurance. Suppose further that each vacation day requires a constant expenditure, and this expenditure is standard across everybody. This allows us to simplify the problem by considering all payments to be in terms of vacation days. What is the least the insurance
company would charge (in terms of vacation days)?
a. 3
b. 4
c. 5
d. 6
a
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In the figure above, the demand is inelastic in the range of prices between
A) $3.50 and $4.50 per cup B) $2.50 and $3.50 per cup C) $1.00 and $2.00 per cup D) $2.25 and $4.50 per cup E) $2.75 and $3.75 per cup
In closing down a military base, environmental inspectors found 100 tons of toxic waste. Which of the following is NOT a determinant of the consumer surplus generated by cleaning up 40 tons of waste?
A) The price of removing a ton of toxic waste B) The original quantity of toxic waste found by the inspectors C) The quantity of toxic waste removed by cleanup D) The effect of each ton reduction of toxic waste on the profitability of the alternative uses for this land E) The effect of each ton reduction of toxic waste on the health of citizens living near the base
In the classical model
A) a decrease in aggregate demand will lead to a decrease in the price level and a decrease in real GDP. B) changes in aggregate supply leave real GDP unchanged. C) a decrease in aggregate demand will lead to an increase in the price level and a decrease in real GDP. D) changes in aggregate demand affect only the price level, not real GDP.
A monopolistic firm will shut down if
A) P < ATC for every level of output. B) P > ATC for every level of output. C) P > AVC for every level of output. D) P < AVC for every level of output.