Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not
a. choose the quantity of butter to produce.
b. set marginal revenue equal to marginal cost to maximize profit.
c. have any fixed costs of production.
d. choose the price at which it sells its butter.
d
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A consumer has $40 that he wants to spend. He is faced with four options: a camera that costs $60, a cell phone that costs $150, a book that costs $10, and a Bluetooth speaker that costs $45
Which of the following is a feasible option for the consumer? A) The book B) The camera C) The cell phone D) The Bluetooth speaker
If the market price of an option just before its expiration is $33 while its strike price is $29, arbitrage will determine a price for it that:
a. leaves an investor indifferent between buying the stock outright or buying an option and then exercising it. b. encourages the investor to buy the stock outright and sell it when the option expires. c. encourages the investor to buy an option and exercise it only after its expiration. d. encourages the investor to buy the stock outright and rewrite an option later.
Suppose Woody's Cabinetmaking calculates the following information for each cabinet produced in a given month: P = $300; Q = 100; AFC = $10; AVC = $140 . Woody's total profit for that month is
a. $140 b. $150 c. $15,000 d. $30,000 e. impossible to determine
The fallacy of composition is the incorrect view that
a. decisions are always made at the margin. b. incentives matter only to those who behave selfishly. c. if something is true for an individual, then it must also be true for the group. d. the value of a good can be objectively measured by its cost of production.