The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house. If there is a 20 percent chance that the home could be completely destroyed, would this homeowner buy insurance?
A) No, because the homeowner is not risk averse.
B) Yes, at any price because the homeowner is risk averse.
C) Yes, but only if it costs less than $10,000.
D) Yes, but only if it costs less than $20,000.
D
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By taking the long position on a futures contract of $100,000 at a price of 115 you are agreeing to ________ a ________ face value security for ________
A) sell; $100,000; $115,000. B) sell; $115,000; $100,000. C) buy; $100,000; $115,000. D) buy; $115,000; $100,000.
The oversimplified money multiplier formula, when the required reserve ratio is m, is
a. change in money supply = change in reserves × m. b. change in money supply = (1/m) /change in reserves. c. change in money supply = (1/m) × change in reserves. d. change in money supply = m/change in reserves.
Which of the following best expresses the law of diminishing returns?
A. Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output. B. Population growth automatically adjusts to that level at which the average product per worker will be at a maximum. C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline. D. Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.
Refer to Figure 13-1. Ceteris paribus, an increase in households' expectations of their future income would be represented by a movement from
A) AD1 to AD2. B) AD2 to AD1. C) point A to point B. D) point B to point A.