Explain why the rate of return from investing in stocks is higher than from investing in bonds
What will be an ideal response?
Most people are risk averse. They only make investments if the rate of return on a risky investment exceeds the rate of return on a less risky investment by a risk premium. Stock are more risky because they have more non-diversifiable risks. Thus, stocks must include a risk premium in their return to attract investors.
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Which of the following is not an example of scarcity?
a. Only some people can afford to buy a BMW automobile. b. Every individual in society cannot attain the highest standard of living to which he or she might aspire. c. Miranda has more oranges in her orchard than she will ever use. d. Each member of a household cannot get everything he or she wants.
When interest rates on treasury bills and other financial assets are low, the opportunity cost of holding money is _______, so the quantity of money demanded will be _______.
A. Low; low B. Low; high C. High; low
Which of the following economic effects of unions tends to improve efficiency?
A. Featherbedding B. Strike or lockout C. Union wage advantage D. Voice mechanism
If a monopolistically competitive firm is producing 450 units of output and at this output level, the price is $15 and the average total cost is $12, the firm profit/loss is equal to ________.
A) -$1,525 B) $1,350 C) -$1,350 D) $1,525