According to the law of demand, if
a. price increases, quantity demanded decreases
b. people's income increases, quantity demanded increases
c. price increases, quantity demanded increases
d. people's income increases, quantity demanded decreases
e. demand increases, supply will increase
A
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The acquisition of more than 10 percent of the shares of ownership in a company in another country is known as
A) net national investment. B) portfolio investment C) net exports. D) none of the above
Suppose, after undergoing genetic testing, you discover that you have a health condition that could result in the emergence of a disability which would make it impossible for you to continue to work. The probability of this happening is 50%. Currently your expected lifetime earnings are $5,000,000, but if the disability hits, your expected lifetime earnings will consist primarily of income earned from government support programs -- and will not add up to more than $1 million.
a. Suppose your tastes are state-independent and the function 
can be used to
represent your tastes in the expected utility form. Are you risk averse?
b. What is the highest premium you would pay to get fully insured?
c. What is the equation (in terms of 
-- consumption in the bad state -- and 
-- consumption in the good state) that defines the full menu of actuarily fair insurance contracts?
d. Set up the optimization problem that you would solve as you choose among actuarily fair insurance contracts.
e. Solve the optimization problem. What does this imply will be the insurance contract (b,p) that you buy -- where b is the benefit level and p is the insurance premium?
f. Finally, suppose you had state dependent tastes and that the functions 
and 
allowed us to use the expected utility form to represent your tastes. How does your answer to (e) change?
What will be an ideal response?
The discount rate refers to
A. the rate at which banks write off bad loans. B. the rate at which assets lose their real value as a result of inflation. C. the rate at which money loses its value as a result of inflation. D. the rate of interest that the Fed charges on loans to commercial banks and thrift institutions.
The profit-maximizing/loss-minimizing level of output
A. 50.
B. 80.
C. 100.
D. 120.