The opportunity cost of a good is the same as its
A) money price.
B) relative price.
C) price index.
D) none of the above.
B
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Dorothy lives in a city with high air pollution. Pollution is a bad, but she is able to avoid air pollution by wearing a face mask. Her preferences are given by
U(q1,q2 ) = (q1 - P)2q22 where q1 is the amount of time she spends wearing a mask, P is the amount of pollution and q2 is a composite of other goods (p2 = 1 ). Dorothy must decide how much to wear a mask and how much q2 to purchase. The price of masks is pM. Assume q1* > P when answering this question. a. Derive Dorothy's demand for masks, q1*(p1,Y, P) b. How does the quantity of pollution affect the demand for masks? That is, find q1*/P. c. How does her income influence the quantity of masks she purchases? That is, find q1*/Y. d. What condition must hold for the assumption q1* > P to hold?
Investment in Musical Acts Signing new music acts can be highly speculative. Record producers at music studios have to get budget approval before they sign a new act to a recording deal. Most acts perform a tried and true form of popular music in which
record sales can be pretty well predicted. However, once they get approval for their budgets, why do producers sometimes sign riskier acts who either flop or "break-out" into the next sensation?
Due to the entry and exit of firms in a monopolistically competitive market:
a. economic profits and economic losses are dissipated in the long run. b. economic profits persist in the long run, but not economic losses. c. economic losses will exist in the long run, but not economic profits. d. both economic profits and economic losses exist in the long run.
Which of the following does not affect the level of autonomous investment?
a. level of technology b. expectations of future growth c. rate of capacity utilization d. rate of interest e. level of income