Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow. 
Figure 8.5 Refer to Figure 8.5. If seven drones are produced, total variable costs are
A. $14.29.
B. $21.43.
C. $50.
D. $100.
Answer: D
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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 that you are risk averse and your tastes are state-independent. Illustrate your expected utility in a graph with lifetime consumption on the horizontal and utility on the vertical axis. b. Illustrate how much you would be willing to pay for full insurance. c. Illustrate what you showed in (b) in a
different graph that has consumption in the "good" state on the horizontal and consumption in the "bad" state on the vertical. d. What would a full menu of actuarily fair insurance contracts look like in your graph from part (c)? Where would you optimize in that graph? e. Now suppose that you believe consumption will be more meaningful if the health condition does not materialize. What changes in your graph from part (d)? What will be an ideal response?
An increase in the price level in the economies of U.S. trading partners will cause the aggregate expenditures function in the United States to
a. shift up. b. shift down. c. get flatter. d. get steeper.
What is the primary difference between the substitution and the income effect of a price change?
A) The substitution effect holds income constant and the income effect holds utility constant. B) The substitution effect is always positive and the income effect is always negative. C) The substitution effect holds utility constant and the income effect holds prices constant. D) The substitution effect is always negative and the income effect is always positive.
Related to the Economics in Practice on page 302: A television at a local electronics store has a marked retail price of $1,000. This television has been advertised at 40 percent off the retail price. The store is also having a promotion of an additional 50 percent off all sale-priced televisions. Based on these stackable discounts, what is the actual selling price of this television?
A. $100 B. $300 C. $350 D. $600