On any given day, a salesman can earn $0 with a 20% probability, $100 with a 40% probability, or $300 with a 20% probability. His expected earnings equal
A) $0.
B) $100 because that is the most likely outcome.
C) $100 because that is what he will earn on average.
D) $200 because that is what he will earn on average.
C
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When income is allocated to two goods, x and y, consumer equilibrium occurs when
a. MUx = MUy b. MUx = MUy, and the budget is exhausted c. MUx/Py = PUx/Py d. MUx/Py = PUx/Py, and some money is not spent e. MUx/Py = PUx/Py, and the budget is exhausted
A public good has the quality of excludability but not the quality of depletability.
Answer the following statement true (T) or false (F)
You have been promised a payment of $100,000 in the future. In which case is the present value of this future payment highest?
a. You receive the payment 2 years from now and the interest rate is 6 percent. b. You receive the payment 2 years from now and the interest rate is 4 percent. c. You receive the payment 3 years from now and the interest rate is 6 percent. d. You receive the payment 3 years from now and the interest rate is 4 percent.
In a free market, what happens if there is a surplus? The price ________.
a. falls b. rises c. stays the same d. rises in the short run and falls back to its original level in the long run