Even when racetrack bettors know very little about the characteristics of horses, why are their aggregate bets often good estimates of the true probabilities of winning, placing, and showing?
The odds of a horse winning a race are calculated from the actual amounts bet on it and on other horses. If bettors lay down their money on the basis of past winning records and present condition of the horses, their relative wagers correctly predict the actual probability that each horse will win a given race, and all bettors, on average, break even.
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The above figure shows the utility of wealth curve for a homeowner whose only possession is a $50,000 house
If there is a 20 percent chance that the home could be entirely destroyed, would this person buy a $20,000 insurance policy to replace the house if destroyed? A) No, it is too expensive. B) No, he is not risk averse. C) Yes, the homeowner would pay even more. D) Yes, this is the most the homeowner would pay.
Frictional unemployment is:
A. a mismatch between the skills workers can offer and the skills that are in demand. B. unemployment caused by workers who are changing their location, job, or career. C. the effect of wages remaining persistently above the market-clearing level. D. the most alarming cause of unemployment.
Economies of scale implies that increases in the scale of operation are associated with
a. decreasing total cost b. decreasing fixed cost c. decreasing average total cost d. increasing average total cost e. decreasing average variable cost
An increase in autonomous consumption has the same equilibrium effect as a(n)
a. decrease in investment. b. increase in investment. c. decrease in net exports. d. increase in taxes.