Alex, who is risk-neutral, is looking for a one-bedroom apartment to rent for the month of August while he's on vacation in Seattle. All of the one-bedroom apartments in the neighborhood where he wants to stay are of equal quality, but 70 percent rent for $700 per month, 20 percent rent for $600 per month, and 10 percent rent for $500 per month. The first apartment Alex finds rents for $700 per month. Suppose Alex is risk-neutral. If the cost to Alex of searching for another apartment is $30, then will he search for another apartment?
A. No, because searching for another apartment is a less-than-fair gamble.
B. Yes, because searching for another apartment is a better-than-fair gamble.
C. Yes, because searching for another apartment is a fair gamble.
D. No, because searching for another apartment is a fair gamble.
Answer: B
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How might openness to the global economy influence the debate between policy activists and nonactivists?
What will be an ideal response?
Based on the graph above, a cause of movement from point 1 to point 2 might be ________
A) a positive price shock B) government policy that lowers unemployment C) an increase in potential output D) an increase in expected inflation E) none of the above
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Select whether the statement is true or false. A. True B. False