Jan's Dry Cleaning holds $10,000 on a typical day, although only $2,000 is essential for carrying out business. Making a midday deposit is estimated to reduce cash holdings to $8,000 and cost an extra $80 per year in lost production. If, in addition, an armored car service is engaged to pick up cash more frequently for a fee of $120 per year, cash holdings will be further reduced to $6,000 per day. Employing a computerized cash management service for an annual fee of $180 would reduce cash holdings further to $4,000. If any reduction in cash holdings will be invested in government bonds earning 7 percent, then how much money should Jan's hold?
A. $4,000
B. $10,000
C. $6,000
D. $8,000
Answer: C
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According to the theory of adaptive expectations, if the inflation rate has been 4.2 percent for the last ten years, people will expect next year's inflation rate to be:
a. 4.2 percent. b. higher than 4.2 percent. c. lower than 4.2 percent. d. 0; that is, they will expect no inflation. e. 8.4 percent.
Which of the following was not addressed by the Clayton Act?
a. exclusive contracts b. price discrimination c. corporate board members serving on competing corporations d. mergers e. price fixing
When a binding price ceiling is imposed on a market to benefit buyers,
a. every buyer in the market benefits. b. every buyer and seller in the market benefits. c. every buyer who wants to buy the good will be able to do so, but only if he waits in long lines. d. some buyers will not be able to buy any amount of the good.
Suppose that a powerplant is given a permit to pollute 10 tons of carbon into the atmosphere. As the powerplant operates, it can generate $200 of profit selling electricity per ton of carbon that it sends into the atmosphere. If the price of the carbon permit is $100 per ton, then:
A. the powerplant is better off shutting down and selling its permit. B. the powerplant is better off buying more permits and selling more electricity. C. the powerplant is better off selling electricity and using the permits to pollute 10 tons of carbon. D. the powerplant is better off shutting down and buying more permits.