Jack is near retirement and worried that if the stock market falls he will not be able to wait to take his funds out, and will have to sell at the bottom of the market.
Richard thinks the probability of a stock market downturn is the same, but he is only 40 and could therefore wait for another turnaround. They face the same budget line. Jack's risk/return indifference curve A) will be concave; Richard's will be convex.
B) will be convex; Richard's will be concave.
C) will be tangent to the budget line at a point to the left of Richard's.
D) will be tangent to the budget line at a point to the right of Richard's.
E) must still be tangent to the budget line at the same point as Richard's.
Question 2
Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good.
A) more, more
B) more, less
C) less, more
D) less, less
Wahkeena Falls at Columbia River Gorge in Oregon in the autumn.
Jack-in-the-Pulpit
J. M. W. Turner, The Upper Falls of the Reichenbach.
A slave market in Marrakesh, Morocco. This lithograph is from the 1800s.
A typical 3 ton (6,000 lb) capacity hydraulic jack.
ADHD (Stock photo)