If fair insurance is offered to a risk-averse person, she will
A) buy enough insurance to eliminate all risk.
B) not buy any insurance because it is overpriced.
C) not buy any insurance since the marginal utility of the amount of the payment is positive.
D) buy enough insurance to cover about half of the possible loss.
A
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Suppose the price of a good rises. When will the resulting substitution effect reduce the quantity demanded of the good?
a. Always. b. Whenever the good is a non-Giffen good. c. Only when the good is normal. d. Only when the good is inferior.
In the market for cotton, suppose the equilibrium price is $10 per ton and the equilibrium quantity is 100 tons. If the government then imposes a price support of $20 per ton,
A) marginal benefit exceeds marginal cost. B) the market becomes more efficient C) marginal cost decreases. D) the government must supply some cotton to offset the shortage that results. E) marginal cost exceeds marginal benefit.
Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $4.00
What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?
A firm doubled all its inputs and experienced a 50% increase in output. If all input prices remain unchanged, the firm's long-run average cost exhibits:
A. economies of scale at the current output level. B. diseconomies of scale at the current output level. C. a constant long-run average cost at the current output level. D. diminishing marginal returns at the current output level.