Describe two main differences between bonds and stocks
What will be an ideal response?
Stocks represent ownership of the issuing company, whereas bonds are a debt of the issuing company. Because stocks represent ownership of a company, a stockholder has a claim on (part) of the company's profit. Bondholders, however, have no claim on the company's profit. Instead, they have a promise by the company to pay them specified amounts of money at specified dates in the future.
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The table above shows the marginal costs and marginal benefits of college education. If 20 million students are enrolled, the marginal external benefit is
A) zero. B) $4,000. C) $5,000. D) $7,000.
Which of the following correctly describes what the Fed used as monetary targets in the past?
A) The Fed used M1 and M2 as targets after 1993. B) After 1980 and before the 1990s, the Fed focused on interest rate targets. C) The Fed focused on M1 as a target after deregulation of the financial markets. D) The Fed increased its reliance on interest rate targets since the mid-1990s.
Briefly explain the components that make up the increase in producer surplus when there is a rise in price.
What will be an ideal response?
A firm is producing 100 pencils per week. The production process requires labor and capital as inputs. Labor costs $6 per labor hour and capital costs $12 per machine hour. Currently, the marginal product of labor is 18 pencils and the marginal product of capital is 36 pencils. To minimize the cost of producing this level of output the firm should use:
A. More capital and less labor B. More labor and less capital C. Less labor and less capital D. The current amounts of labor and capital