Deciding to invest in capital is a short-run decision.
Answer the following statement true (T) or false (F)
False
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You have been hired by the city to determine whether or not an increase in the price of tickets for the mass transit system would raise system revenues. The debate has been heated and the city council seems to be divided. One side argues that in order
to increase revenues from the transit system, prices must be increased. The opposing side argues that a price increase at this time will lower revenues. What assumptions are each side making about the price elasticity of demand, and how might you determine the best course of action?
Accounting profit is defined as
a. total revenue minus opportunity cost b. total revenue minus all costs of production c. total revenue minus explicit costs d. the sum of marginal revenues received from all units produced e. the difference between marginal revenue and marginal cost
Private decisions about consumption of common resources and production of public goods usually lead to an
a. efficient allocation of resources and external effects. b. efficient allocation of resources and no external effects. c. inefficient allocation of resources and external effects. d. inefficient allocation of resources and no external effects.
The reason that this scenario perfectly illustrates the problem of "moral hazard" in particular is that
Suppose that engineers designed a revolutionary american football helmet that greatly increased the amount of protection for players' heads. Unfortunately however, after the new helmets were introduced, there was an INCREASE in head injuries! This happened because players started taking greater risks on the field due to the belief that the new helmets would protect them. A. A change in policy (i.e., the helmets) led to more risky behavior after the new policy was introduced. B. Football players are usually "risk seeking" individuals by nature. C. There was no conceivable way for the engineers to (scientifically) demonstrate that the new helmets were safer than the old ones. D. All of the above