Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes:
Prize 1: $150,000 to be received right away, with three additional payments of $150,000 to be received each year for the next three years.
Prize 2: $500,000 to be received right away.
If the interest rate is 5 percent, what is the present value of each prize?
Prize 1: Present value = $150,000 + [$150,000 / (1 + 0.05 )] + [$150,000 / (1 + 0.05 )2] + [$150,000 / (1 + 0.05 )3] = $558,487.20
Prize 2: Present value = $500,000
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If the real interest rate is equal to the nominal interest rate in an economy:
A) inflation must be negative in the economy. B) inflation must be zero in the economy. C) inflation must be positive in the economy. D) the nominal interest rate must be zero.
When future labor income rises in a large open economy, it causes the current account to ________ and investment to ________
A) fall; rise B) rise; remain unchanged C) fall; fall D) rise; rise
As the price of dvds is raised from $3 to $5, their quantity demanded fell from 200,00 . to 180,000 . The elasticity of demand of dvds is:
a. 0.21 b. 1.28 c. 3.52 d. .65
Troll Corporation sells dolls for $10.00 each in a market that is perfectly competitive. Increasing the number of workers from 100 to 101 would cause output to rise from 500 to 550 dolls per day. The marginal revenue product for the 101st worker is:
a. $10.00. b. $500. c. $5,000. d. $1,010.