Suppose Karl divides his time between making birdhouses and growing artichokes. Karl's friend recently gave Karl some new woodworking tools that greatly reduced the amount of time it takes Karl to make each birdhouse, but the new tools had no impact on the amount of time it takes Karl to grow artichokes. Thus, the new tools ________ Karl's opportunity cost of growing artichokes.
A. had no effect on
B. halved
C. decreased
D. increased
Answer: D
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In the above table, when x increases from 4 units to 6 units, y changes by ________ units
A) 2 B) -2 C) 6 D) -6
An externality can be a cost or benefit arising from the production of a good that falls upon
A) consumers but not producers. B) producers but not consumers. C) both the consumer and the producer. D) someone other than the consumer or producer.
Inflation
What will be an ideal response?
This is a two-part question: We have a firm that needs $1000 to obtain a new machine for its business. It can either issue stock or bonds, or some combination of both. If it issues bonds it will have to pay $8.00 in interest for every $100 borrowed. Finally, assume the company will earn $150 in good years and $75 in bad years, with equal probability. The first part of the question is to (a) determine the payment to the equity holders under the following three scenarios: (i) the first is the firm uses 0% debt financing; (ii) the second is the firm uses 50% debt financing, and (iii) the third finds the firm using 80% debt financing. The second part of the question is to (b) determine the expected equity return (%) under each scenario.
What will be an ideal response?