50.1K

Verified Solution

Link Copied!

5. (32 Points) State whether the following statements are TRUE, FALSE, or UNCERTAIN and explain why. You can take the non-italicized portions as given. For each of these problems, you must explain your answer with words, math, and/or pictures. The quality of the explanation is a substantial part of the grade. (a) (4 Points) Suppose that some firm uses labor and capital to produce output, but is unable to adjust its capital stock in the short-run. True, False, or Uncertain: the firm's supply curve will be more upward-sloping in the short-run than in the long-run. (b) (4 Points) Let's assume that someone is in the process of adopting a shelter cat (that they already love very much and would want to pay for any needed medical procedures). True, False, or Uncertain: a reasonably risk-averse person should buy fairly-priced "health insurance" that would pay (if needed) for the cat's very expensive life-saving medical procedure over the following year. (c) (4 Points) True, False, or Uncertain: there is no need for the government to subsidize applied science applications because firms will be able to patent their invention and price as a monopolist. (d) (4 Points) True, False, or Uncertain: car insurance is more expensive for those under 21 years old because of price discrimination. (e) (4 Points) True, False, or Uncertain: When there is a merger between two firms, who were competing Cournot, the price in the market will increase. (f) (4 Points) True, False, or Uncertain: firm price discrimination increases firm profits and decreases consumer surplus. (g) (4 Points) True, False, or Uncertain: a risk-neutral firm cares only about maximizing expected profit and so is not affected by uncertainty. (h) (4 Points) True, False, or Uncertain: risk-averse individuals would prefer a new fixed-return investment to a new investment with the same expected value and more variance in its return

Answer & Explanation Solved by verified expert

See Answer