Use the following graph, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product, to answer the next question.
Sd + Q is the product supply curve after an import quota is imposed. The effect of the import quota on domestic price and domestic consumption is
A. the same as that of a tariff of Pa?Pt.
B. the same as that of a tariff of Pt?Pc.
C. to raise price higher and lower consumption further than a tariff of Pt?Pc.
D. the same as that of a tariff of Pa?Pc.
Answer: B
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Suppose you rent an apartment and are worried about a break-in that results in theft of your property. Suppose your monthly consumption level is currently $4,000 but a break-in would result in you having to finance your purchase of replacement property -- and this would reduce your current consumption to $2,000 per month. There is a 10% chance of a break-in, and your tastes can be modeled with the expected utility form using the function 
.
a. What is the utility of the expected value of the gamble you face, and what is the expected utility of the gamble?
b. How does your answer to (a) change if the probability of a break-in increases to 20%? c. What is the certainty equivalent and the risk premium in each case? d. What equation would you have to solve to get the answer to the following: How much would you be willing to pay to keep the crime rate in your area from increasing (i.e. to keep the probability of a break in to 10% rather than have it rise to 20%) assuming there is no rental insurance available in your area? e. What would you be willing to pay to avoid the increase in the crime rate if there is a full menu of actuarily fair rental insurance available at all times? What will be an ideal response?
In the figure above, Sam originally selects his consumption bundle at point A with 3 pounds of olives and 4 pounds of pickles a year
Then the price of pickles rises and the price of olives falls so that his budget line rotates but it still goes through point A. Sam's consumption of olives A) definitely will rise. B) definitely will fall. C) definitely will stay the same. D) could rise, fall, or stay the same.
A shortage exists in a market if
a. there is an excess supply of the good. b. quantity supplied exceeds quantity demanded. c. the current price is below its equilibrium price. d. All of the above are correct.
If long-term investments are increasing,
A. current consumption must be increasing. B. interest rates must be relatively low. C. interest rates must be relatively high. D. the people must be experiencing a “defective telescopic faculty.”