Answer the following statements true (T) or false (F)
1. Economists widely fear that the world will run out of energy in the next century.
2. Recent studies indicate that as the price of a barrel of oil rises to $80, the use of biodiesel as
an alternative fuel becomes economically viable.
3. As technologies improve, the costs of producing alternatives will likely fall, reducing the cost of
replacing oil.
4. Optimal resource allocation involves considering current and future uses, benefits and costs.
5. In the extraction of a nonrenewable resource, increased current extraction will reduce the
extraction firm's user costs.
1. FALSE
2. TRUE
3. TRUE
4. TRUE
5. FALSE
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Assume Brandon's benefit function for water is S(W) = ?W and he consumes water both in droughts, WD, or in the rainy season, WR. Assume his current consumption bundle is WD = 36 and WR = 25 and the probability of drought is 0.75. What is Brandon's expected utility?
A. 5.75 B. 33.25 C. 11 D. 30.5
The government might increase its spending to end a recession because:
A. allowing the short-run aggregate supply to adjust since back to the long-run can take a long time. B. the economy experiences lower prices at the long-run equilibrium. C. the economy enjoys a higher level of output in the long run. D. None of these justify why the government might change its spending to end a recession.
An unplanned economy operating under laissez faire
a. allocates resources by market supply and demand. b. cannot respond to basic questions about production and distribution. c. shows breakdowns with frequent surpluses and shortages. d. allocates goods and services under government subsidy.
A society consists of three individuals: Larry, Margaret, and Nina. In terms of income and utility, Larry is currently best-off, Margaret ranks in the middle, and Nina is worst-off. Which of the following statements is correct?
a. Utilitarianism suggests that government policies should strive to maximize the sum of all three individuals' utility. b. Liberalism suggests that government policies should strive to maximize the sum of Larry's utility and Nina's utility. c. Libertarianism suggests that government policies should strive to make Nina better off at the cost of Larry and Margaret. d. Utilitarianism suggests that the government policies should strive to make Nina better off than Margaret.