Suppose a risk-neutral power plant needs 10,000 tons of coal for its operations next month. It is ...

Suppose a risk-neutral power plant needs 10,000 tons of coal for its operations next month. It is uncertain about the future price of coal. Today it sells for 60 a ton but next month it could be 50 or 70 (with equal probability). How much would the power plant be willing to pay today for an option to buy a ton of coal next month at today's price? (Ignore discounting over the short period of a month.)
 a. 5
  b. 4
  c. 3
  d. 0

QUESTION 2

The most significant expansion of Medicaid since its inception occurred in 1997 and is referred to as
 a. SCHIP.
  b. SHIP.
  c. TANF.
  d. AFDC.

QUESTION 3

Continuing with the same vacation-insurance company from the preceding question, is there any vacation-day price that would both strictly increase the family's expected utility (compared to no insurance) and strictly increase the profits of the risk-neutral insurance company?
 a. No.
  b. Yes, 3 or 4.
  c. Yes, 4.
  d. Yes, 4 or 5.

QUESTION 4

Which of the following statements is true about the Medicaid program?
 a. Eligibility standards are uniform across states.
  b. The program is totally funded by federal tax revenues.
  c. Everyone in the poverty-level population is eligible for benefits.
  d. About 20 of total outlays are for nursing home and home health care for the elderly.
  e. All of the above are true.

QUESTION 5

Continuing with the same vacation-insurance company from the preceding question, what vacation-day price(s) would be acceptable to both the family and the insurance company?
 a. 3 or 4
  b. 3,4 or 5
  c. 3,4,5 or 6
  d. 3,4,5,6 or 7