Suppose that U.S. tastes for British goods increase. Then, in Figure 9-3
a. the supply curve shifts from S1 to S2
b. the supply curve shifts from S2 to S1
c. the demand curve shifts from D2 to D1
d. the demand curve shifts from D1 to D2
e. both demand and supply shift to the right
Answer: d. the demand curve shifts from D1 to D2
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Assume that an individual has to decide between a two-day vacation and a three-day vacation to the same place. If he uses optimization in differences, he will:
A) only think about the net benefits of the extra day. B) compare the total net benefits of both alternatives. C) choose the three-day vacation only if the costs incurred on the third day exceed the benefits he receives. D) spend more time to come to a decision than if he would have used optimization in levels.
If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then total surplus will be
A) $0. B) $4 million. C) $8 million. D) $16 million.
The above figure shows Bob's utility function. He currently has $50 and is considering investing all of it in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0. Bob will
A) definitely make the investment because the expected utility of the investment exceeds the utility of his $50. B) definitely not make the investment because the expected utility of the investment is less than the utility of his $50. C) definitely make the investment because he is indifferent between having $50 and having an investment with an expected value of $50. D) definitely not make the investment because he is indifferent between having $50 and having an investment with an expected value of $50.
Refer to the table below. If the attorney reviews 53 patents, what is the expected cost of infringement?
The above table shows the quantity of patents reviewed by a firm's attorney and the corresponding probability that the firm will infringe on another firm's patent. The cost of infringement is $50,000.
A) $2,000
B) $35,000
C) $50,000
D) -$35,000