Suppose in the market for used cars, buyers would be willing to pay $9,000 for a car in good condition, while buyers would have to incur a cost of $3,500 to repair a car in poor condition. If the probability of a car being in bad condition is 0.35, what price would a risk-neutral buyer be willing to pay?
a. $3,925
b. $1,925
c. $7,775
d. $5,850
C
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For which of the following products would price discrimination be most difficult?
a. photograph developing b. tooth extractions c. airline tickets d. beer e. college education
Which of the following is true of fiscal policy before the Great Depression of the 1930s?
a. Fiscal policy was made at the federal level. b. Policies associated with national defense were made at the state level. c. Environmental degradation and education were the focus areas of the federal government while other areas of government policy were dealt by individual states. d. The federal budget was determined mostly by economists and not by politicians. e. National defense and foreign trade were the focus areas of the federal government while other areas of government policy were dealt by individual states.
A monopoly arises when there:
a. is a firm desiring to compete in many markets. b. is a firm wanting to maximize profits. c. are barriers to the entry of other firms in the industry. d. is government intervention to establish and enforce a price ceiling.
The money-creation formula is oversimplified because it assumes that
A. every recipient of a bank loan will redeposit the proceeds in another bank. B. loan recipients will not take any of the proceeds in cash. C. every bank lends out all excess reserves. D. All of these responses are correct.