Insurance companies:
A. only profit by selling to risk neutral clients.
B. profit from the difference between the premiums paid and the expected value of clients' payouts.
C. must charge less than the expected value of payout, otherwise they would go out of business.
D. All of these statements are true.
Answer: B
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If the real interest rate is 3% and the inflation rate is 6%, the nominal interest rate is
a. 2% b. 3% c. 9% d. 18%
When what people pay does not necessarily reflect the real value they put on a good, it is likely that the:
A. good will be undersupplied. B. not a socially desirable good. C. free rider problem does not exist. D. good is easily excludable.
Disposable income equals:
a. Consumption minus saving b. Saving times consumption c. Consumption plus saving d. Saving divided by consumption
If a firm's total costs are $100 when 10 units of output are produced and $103 when 11 units of output are produced, the marginal cost of the 11th unit is
A. $1. B. $3. C. $5. D. $9.36.