Suppose that the salary range for recent college graduates with a bachelor's degree in economics is $30,000 to $50,000, with 25 percent of jobs offering $30,000 per year, 50 percent offering $40,000 per year and 25 percent offering $50,000 per year and that in all other respects, the jobs are equally satisfying. Assume that in this market, a job offer remains open for only a short time so that continuing to search requires an applicant to reject any current job offer. Moe has just received a job offer that pays $40,000 per year. Moe should:
A. reject the offer if he is risk averse.
B. only accept the offer if he is risk-neutral.
C. reject the offer regardless of his preference for risk.
D. accept the offer if he is risk averse.
Answer: D
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Refer to the scenario above. Suppose you decide to buy a Toyota Corolla. You value the car for $10,000. You don't know it, but the car dealer values it for $8,500. Which of the following is likely to be true?
A) You will end up buying a high-quality car. B) You will end up buying a bad-quality car. C) You will end up earning a positive consumer surplus. D) You will choose not to buy the car.
Monopolistic competitive firms in the long run earn:
a. positive economic profits. b. zero pure economic profits. c. negative economic profits. d. none of these.