Refer to Scenario 5.5. Which of the following statements is true?
A) The expected cost of not fixing the car is less than the cost of fixing it.
B) The expected cost of not fixing the car is greater than the cost of fixing it.
C) It is not possible to tell whether the expected cost of fixing the car is less than the cost of fixing it, because the probabilities are subjective.
D) It is not possible to tell whether the expected cost of fixing the car is less than the cost of fixing it, because the probabilities are not equal.
B
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Using the compensating differential approach, the value of a life is calculated as
A) the compensating differential multiplied by the increased chance of death. B) the sum of the compensating differential and the increased chance of death. C) the compensating differential divided by the increased chance of death. D) the difference between the compensating differential and the increased chance of death.
The cost of making an economic exchange is called a(n) ________ cost
A) sunk B) transaction C) social D) accounting
The Criminal Records Corporation is operating at its minimum efficient scale, selling 10,000 records per month via late-night cable TV advertising. It currently buys pressed records from Hole-in-the-Middle, Inc, which has a minimum efficient scale of 100,000 records per month. Which of the following should Criminal Records do?
a. Continue to buy 10,000 records from Hole-in-the-Middle, which can make the records more cheaply. b. Buy 100,000 records from Hole-in-the-Middle, so that company can reach its minimum efficient scale too. c. Buy Hole-in-the-Middle and use its facilities to manufacture the 10,000 records it needs. d. Buy Hole-in-the-Middle and stop operating as Criminal Records because Hole-in-the-Middle is the more efficient business. e. Buy Hole-in-the-Middle and stop operating as Criminal Records because Hole-in-the-Middle is the larger business.
A situation in which an individual has no information about probabilities and the underlying distributions of the possible outcomes of an investment choice is called:
a. a prior distribution. b. updating. c. risk tolerance. d. pure uncertainty.