The certainty equivalent of a gamble is negative when tastes are risk loving.
Answer the following statement true (T) or false (F)
False
Rationale: The certainty equivalent is always positive -- and it is greater than the expected value of the gamble when tastes are risk loving.
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What happens to the absolute value of the marginal rate of substitution as you move down a convex (bowed toward the origin) indifference curve?
A) It could increase or decrease. B) It remains constant. C) It decreases. D) It increases.
If the game in Scenario 13.17 were to be infinitely repeated, waging a price war might be a rational strategy
A) because there would be no short-term losses. B) because the short-term losses might be outweighed by long-term gains from preventing entry. C) if the potential entrant were irrational. D) if the monopolist had excess capacity. E) if there were no sunk costs to the potential entrant.
Ceteris paribus, an increase in consumers' income will result in: a. a decrease in demand for an inferior good
b. an increase in demand for an inferior good. c. a decrease in the quantity supplied of an inferior good. d. an increase in the quantity supplied of an inferior good.
Assume that the coefficient of elasticity of product demand is 0.1 in the food and beverages (F&B) industry and is 2.3 in the oil and gas (O&G) industry. Other things equal, labor demand will be
a. relatively inelastic in both F&B, and O&G industries. b. relatively elastic in both F&B and O&G industries. c. more elastic in O&G industry than in F&B. d. more elastic in F&B industry than in O&G.