The international organization most responsible for rising prices during the 1970s was
a. the WTO.
b. OPEC.
c. the CIA.
d. the World Bank.
e. the Trilateral Commission.
b
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Loss aversion is the tendency to:
A. weigh gains more heavily than losses. B. dislike gains, but enjoy losses. C. enjoy gains, but dislike losses. D. weigh losses more heavily than gains.
If monopolistically competitive firms in an industry are making an economic profit, then:
A. firms will exit the industry and product demand will decrease for the firms that remain. B. firms will exit the industry and product demand will increase for the firms that remain. C. new firms will enter the industry and product demand will increase for the existing firms. D. new firms will enter the industry and product demand will decrease for the existing firms.
A society's production possibility frontier is bowed out from the origin because some resources are better suited for producing one good as opposed to the other.
Answer the following statement true (T) or false (F)
Suppose, after undergoing genetic testing, you discover that you have a health condition that could result in the emergence of a disability which would make it impossible for you to continue to work. The probability of this happening is 50%. Currently your expected lifetime earnings are $5,000,000, but if the disability hits, your expected lifetime earnings will consist primarily of income earned from government support programs -- and will not add up to more than $1 million.
a. Suppose your tastes are state-independent and the function 
can be used to
represent your tastes in the expected utility form. Are you risk averse?
b. What is the highest premium you would pay to get fully insured?
c. What is the equation (in terms of 
-- consumption in the bad state -- and 
-- consumption in the good state) that defines the full menu of actuarily fair insurance contracts?
d. Set up the optimization problem that you would solve as you choose among actuarily fair insurance contracts.
e. Solve the optimization problem. What does this imply will be the insurance contract (b,p) that you buy -- where b is the benefit level and p is the insurance premium?
f. Finally, suppose you had state dependent tastes and that the functions 
and 
allowed us to use the expected utility form to represent your tastes. How does your answer to (e) change?
What will be an ideal response?