When does an insurance contract benefit both the parties?
Insurance is a contract that reallocates risk between the insurer and the insured. This exchange of risks benefits both sides of the contract if they have different degrees of aversion or different abilities to bear risk.
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Refer to Figure 18-1. Area E + H represents
A) the portion of sales tax revenue borne by consumers. B) the portion of sales tax revenue borne by producers. C) the excess burden of the sales tax. D) sales tax revenue collected by the government.
Usually, the cost of capital for newly issued stock is ________ the cost of retained earnings
A) lower than B) higher than C) same as D) either higher or lower than
Investment in social overhead capital refers to investment in areas like power plants and road construction.
Answer the following statement true (T) or false (F)
A firm's revenue minus its factor payments equals
a. zero. b. the profits or losses earned by the firm. c. the quasi-rents earned by the factors of production. d. the firm's total revenue.