Suppose option A has a higher variance than option B. Which of the following statements is, in general, true?
A. A risk-neutral person is indifferent between options A and B.
B. A risk-averse person prefers option B to option A.
C. A risk-averse person prefers option A to option B.
D. There is insufficient information to determine which is true.
Answer: D
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What will be an ideal response?
Game theory is used in a number of areas in economics. What is the primary reason that it is used in analyzing oligopoly type market structures?
a. The firms are producing a similar product b. The firms are producing differentiated products c. The demand curve facing the oligopolistic firms is perfectly inelastic d. The mutual interdependence of firms in industries with a small number of firms e. The demand curve the oligopolistic firm faces is downward sloping
Assume the demand for cigarettes is relatively inelastic, and the supply of cigarettes is relatively elastic. When cigarettes are taxed, we would expect
a. most of the burden of the tax to fall on sellers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. b. most of the burden of the tax to fall on buyers of cigarettes, regardless of whether buyers or sellers of cigarettes are required to pay the tax to the government. c. the distribution of the tax burden between buyers and sellers of cigarettes to depend on whether buyers or sellers of cigarettes are required to pay the tax to the government. d. a large percentage of smokers to quit smoking in response to the tax.
If total production is less than total expenditures, then business firms
A) have overproduced. B) will cut back on production. C) will raise production. D) will experience increases in inventory. E) a and d