Constantine purchased 100 shares of IBM stock several years ago for $150 per share. The price of these shares has fallen to $55 per share. Constantine's investment strategy is "buy low, sell high"
Therefore, he will not sell his IBM stock until the price rises above $150 per share. If he sells at a price lower than $150 per share he will have "bought high and sold low." Constantine's decision: A) is correct and shows a solid command of the nature of opportunity cost.
B) is incorrect because the original price paid for the shares is a sunk cost and should have no bearing on whether the shares should be held or sold.
C) is incorrect because when the price of a stock falls, the law of demand states that he should buy more shares.
D) is incorrect because it treats the price of the shares as an explicit cost.
B
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Owners of a proprietorship have ________ liability and stockholders in a corporation have ________
A) limited; limited B) limited; unlimited C) unlimited; unlimited D) unlimited; limited
The income effect means that at a high enough wage rate labor supply curve has a
A) positive slope because an increase in the wage rate increases income. B) positive slope because an increase in income increases the demand for leisure. C) negative slope because an increase in income increases the demand for leisure. D) negative slope because an increase in the wage rate increases hours worked to earn more income.
An increase in supply of a good is caused by:
A) resource prices rising. B) a fall in the price of the good. C) an increase in the number of sellers. D) expectations of future price increases.
Which of the following is an example of an in-kind transfer?
A. Medicaid. B. Social Security. C. Income transfers. D. TANF.