During a period of economic recession, which of the following measures would be the most effective in boosting demand without causing long-term inefficiency, to stimulate economic recovery?
An economy is experiencing stagflation, characterized by high inflation and high unemployment. The government is considering various measures to address the situation. Which of the following measures is most likely to reduce inflation without worsening unemployment?
Three friends (Donald, Bob and Catherine) want to dine out. They may choose among an Italian, a Mexican and a Vietnamese restaurant. Their ordinal preferences are as follows: i) Donald: Italian < Mexican < Vietnamese ii) Bob: Vietnamese < Italian < Mexican iii) Catherine: Mexican < Vietnamese < Ital
Two firms, A and B, compete for the same market. Both firms have fixed costs of 100. However, their marginal costs differ: Firm A: Marginal Cost =5 Firm B: Marginal Cost = 8 The market demand is given by: QD = 1000 − 100\cdot$ P Assuming firms compete by setting prices, determine the equilibrium sal
A government is concerned about the high price of a drug essential for a rare disease. Which of the following measures would be most effective in reducing the drug's price while ensuring its availability to patients?
In a picturesque village, two restaurants share the market. At the moment, they get quite the same profit, 15.000 each. They have to consider spending20.000 on renovating the road to ease access. If the road is renovated, their profit will increase to $50.000 each (without taking into account any re
In the Lego movie (2014) the hero (Emmet) is happy and we hear: "Drink overpriced coffee!". Emmet gets his coffee and Barista says: "Here you go, that's $37" Emmet responses: "Handsome!" and picks the coffee. This means that his price elasticity of demand might be around:
Mr. Krab, the Krusty Krab owner had an amazing idea to increase his profits: he convinced employees of his company to work for half the money they used to get paid without reducing their productivity and, of course, increased profits. He shares this story publicly with an influencer and now all comp
A principal-agent problem is a conflict of interest between a person or entity (principal) and another person or entity (agent) authorized to act on their behalf. The problem is especially serious when each party possesses a different information set. Among the following examples, pick the one that
According to the IMF, the global price of orange in December 2024 was about 5 per pound. A country set a tariff of3 on the product. According to the diagram, the deadweight loss is: Source: https://fred.stlouisfed.org/series/PORANGUSDM
As part of a national highway renovation, the government rerouted traffic to bypass all villages. Bulrush, a small village that relied economically on passing travelers stopping for food and fuel, now sees only 30% of its original visitors. This has led to a decline in business services and amenitie
You own a house that has a market value of 625,000 and are considering insuring it against natural disasters (fires, tornados, floods etc.). The insurance would cost20,000 and there is a 3% chance that your house will be struck by a natural disaster. Given that you accepted the offer, which statemen
A factory employs 6 workers and is required by law to maintain this workforce. It may produce good A or good B. Currently, it produces and sells 800 units of good A. Given that the opportunity cost of producing A is 5 units of B per unit of A, how many units of product B could be produced along with
At the equilibrium point for good Z, the elasticity of demand is -0,5 and the elasticity of supply is 1,69. If a per unit tax of 5 euro is introduced, which group – consumers or producers – would bare most of the tax burden?
If you deposit $5,000 in a savings account that offers a 3% annual interest rate compounded annually, how much (approximately) will you have after 2 years?
A perpetuity is a stream of payments over certain periods that goes on forever. It's like a never ending annuity. If the holder of a perpetuity receives $175,000 per year and the discount rate is 4%, the value of the perpetuity is:
Betty invests 15,000 in an asset. There is a 50% probability that the asset will generate a cashflow of15,000 at the end of Year 1. If the Year 1 cashflow occurs, there is a further 50% probability of receiving an additional $15,000 cashflow at the end of Year 2. Assuming a 5% discount rate, what is
You earn 4,000 per month. You spend2,800 on living expenses, save 800, and pay400 towards debt (200 interest payment,200 principal repayment). Your net worth has increased by:
Moneyland uses Money and Cashtan uses Cash, as their currencies. Currently, spot exchange rate is 1.25 Money = 1 Cash. The three-month forward exchange rate is 1.30 Money = 1 Cash. The currency market is assumed perfect, and the International Fisher Effect holds. Which of the following statements is
You are considering an investment of $1,000 in one of two alternative projects, A and B. Your required discount rate is 5%. Based on the cashflows of each project, which of the following statements is correct?
A project has average estimated cash flows of 5,000 per year with an initial investment of10,000. Depreciation is straight-line with no residual value and the project has a three-year life span. The company has set a Required Rate of Return (RRR) equal to x%. The project would be accepted for:
A company plans to invest 250,000 euro and expects to receive annual cash flows of 100,000 euro for the next three years. What is the discount rate required for the project to break even (Net Present Value = 0)?
