A manager is attempting to assess the probability of a recession ending in the next six months and its impact on expected profitability. The manager believes there is a 75 percent chance the recession will end in six months and profits will return to $400 million. However, there is a 25 percent chance the recession will not end in six months, resulting in a $5 million loss. The expected profits over the next six months are:
A. $301.25 million.
B. $395 million.
C. $405 million.
D. $298.75 million.
Answer: D
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A substitute is a good
A) that can be used in place of another good. B) that is not used in place of another good. C) of lower quality than another good. D) of higher quality than another good.
If an increase in production costs (say, an increase in the wage rate) results in an upward shift in the MC curve, but the MC curve still passes through the MR gap created by the kinked demand curve, then the oligopolist will respond to that increase in production costs by
a. keeping price and output the same b. raising price and decreasing output c. lowering price and increasing output d. raising price and raising output e. lowering price and lowering output
The price elasticity of demand for a good measures the responsiveness of:
A. price to a 1 percent change in the quantity demanded of that good. B. price to a 1 percent change in the demand for that good. C. quantity demanded to a 1 percent change in price of that good. D. demand to a 1 percent change in price of that good.
According to the circular flow diagram, in return for land, labor, capital and entrepreneurial ability, households receive _______________________________.
Fill in the blank(s) with the appropriate word(s).