The fewer the substitutes for a good the greater will be the value of the price elasticity of demand coefficient
a. True
b. False
Indicate whether the statement is true or false
False
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Johnny owns a house that would cost $100,000 to replace should it ever be destroyed by fire. There is a 0.1% chance that the house could be destroyed during the course of a year. Johnny's utility function is U = W0.5
How much would fair insurance cost that completely replaces the house if destroyed by fire? Assuming that Johnny has no other wealth, how much would Johnny be willing to pay for such an insurance policy? Why the difference?
If people regard economic fluctuations as temporary,
a. spending will be less sensitive to changes in income, and the multiplier will be larger. b. spending will be less sensitive to changes in income, and the multiplier will be smaller. c. they will be pessimistic about the future. d. spending will be more sensitive to changes in income. e. spending will be independent of changes in income.
A merit goods is
a. a public good provided by government that people deem necessary and important b. a good that the market does not produce in quantities and at prices that governmentbelieves is warranted c. the highest quality of a public good that government produces d. a public good produced in the most efficient way e. a civilian public good as opposed to a national security good produced bygovernment
Public Broadcasting, in its fund drives, often appeals to viewers by saying, "without you, there will be no Big Bird." This is likely to ________ the free-rider problem and lead to a ________ level of contribution to the public good.
A. increase; smaller B. increase; larger C. reduce; smaller D. reduce; larger