One million automobiles have a defect that could cause the car to explode; however, only one of those cars will actually explode. Nobody knows which one car it is
When the car does explode, the victim's family will sue the automaker for $1 million and win. The defect costs $2 per car to repair. What does economics predict about the automaker's decision to repair the defect?
Correcting the defect will cost $2 million. Not correcting the defect will only cost $1 million. Economics predicts that the automaker will not correct the defect.
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Suppose Jenny's marginal utility of fish is 40 and her marginal utility from chips is 20. The price of fish is $10 and the price of chips is $1. What should Jenny do to maximize her utility? Explain your answer
What will be an ideal response?
Suppose the market for a good is initially in equilibrium. Which of the following is most likely to happen if supply increases by a smaller amount than the increase in demand?
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