Assume that yields on bonds (rate of return) begin to fall while the stock market is booming, what should we see happen to the demand and price of stocks and why?.
What can we say about the opportunity cost of holding on to bonds in this situation?
Ques. 2Assuming r is the interest rate, to compute the present value of a dollar to be received a year from today, you
A) multiply the dollar by r.
B) divide the dollar by (1 - r).
C) multiply the dollar by (1 + r).
D) divide the dollar by (1 + r).
Ques. 3If regulators of the local gas and water utility companies require those firms to price their service at marginal cost
A) there would be a deadweight loss in their markets.
B) the firms might require a tax-financed subsidy to survive.
C) their customers would enjoy no consumer surplus.
D) None of the above answers are correct.
Ques. 4In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level
A) marginal private cost equals the marginal private benefit.
B) marginal private cost is less than the marginal private benefit.
C) marginal social cost equals the marginal private benefit.
D) marginal social cost is greater than the marginal private benefit.
Ques. 5The big tradeoff between equality and efficiency exists because
A) redistribution uses resources and weakens incentives to work.
B) redistribution uses resources and strengthens incentives to work.
C) redistribution creates additional resources and weakens incentives to work.
D) redistribution creates additional resources and strengthens incentives to work.
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