If home prices rise far above the value of the homeowner's mortgage loan,
A. homeowners will be tempted to default on their mortgage loans.
B. default risk faced by lenders tends to decrease.
C. homeowners will have greater difficulty obtaining a home equity line of credit.
D. default risk faced by lenders tends to increase.
Answer: B
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From a society’s viewpoint, when all resources are fully employed, a decision to have more of one thing means we must give up something else.
Answer the following statement true (T) or false (F)
Suppose an individual faces a decision of whether or not to make an investment 2 years from now. The investment will cost $10,125, and it will yield a benefit b 2 years later. a. Suppose the individual treats a dollar 1 year from now the same way as $0.90 now. How low can b be for this individual to plan to make the investment in two years?
b. Now suppose that the individual's tastes are better characterized by the beta-delta model. Suppose delta is 0.9. For what values of beta will the individual plan the same course of action 2 years from now as he would in the typical delta model (with the same delta)? c. Suppose beta is 0.9 (with delta also equal to 0.9). How low can b be in order for the individual to be willing to undertake the investment when he faces the choice in 2 years? d. For what range of values for b does the individual from (c) plan to undertake the investment but then decides not to when the time comes? What will be an ideal response?
Suppose there are three power-generating plants, each of which has access to 5 different production processes. The table below summarizes the cost of each production process and the corresponding number of tons of smoke emitted each.ProcessABCDE(smoke/day)(4 tons/day)(3 tons/day)(2 tons/day)(1 tons/day)(0 tons/day)Cost to Firm X ($/day)$500$514$530$555$585Cost to Firm Y ($/day)$400$420$445$480$520Cost to Firm Z ($/day)$300$325$360$400$550 Suppose the government imposes a tax of $21 on each ton of smoke emitted. To minimize costs, Firm X will emit ________ tons; Firm Y will emit ________ tons, and Firm Z will emit ________ tons.
A. 2; 3; 4 B. 3; 4; 4 C. 1; 2; 3 D. 1; 2; 4
It is common in most towns that major department stores are located next to each other. Provide an intuitive explanation of this common finding.
What will be an ideal response?