For a competitive firm, the marginal revenue product is:
A. always positive and nears zero as quantity increases.
B. always negative and nears zero as quantity increases.
C. decreasing eventually as quantity increases.
D. zero when profits are maximized.
Answer: C
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Why do people hold money in the classical model?
What will be an ideal response?
John is trying to decide whether to expand his business or not. If he continues his business as it is, with no expansion, there is a 50 percent chance he will earn $100,000 and a 50 percent chance he will earn $300,000. If he does expand, there is a 30 percent chance he will earn $100,000, a 30 percent chance he will earn $300,000 and a 40 percent chance he will earn $500,000. It will cost him $150,000 to expand. John expects the value of his earnings to be ________ if he expands and ________ if he does not expand.
A. $320,000; $200,000 B. $170,000; $50,000 C. -$30,000; $200,000 D. $120,000; $200,000