Suppose one is offered a gamble in which you win 1,000 half the time but lose 1,000 half the time. Since in this case one is as likely to win as to lose the 1,000, the average payoff on this gambleits expected valueis:
0.5 1,000 + 0.5 (-1,000 ) = 0.
Under such circumstances:
A) no one will take the gamble.
B) risk averse individuals will take the gamble.
C) risk lovers individuals will not take the gamble.
D) risk neutral individuals will not take the gamble.
E) risk lovers and risk neutral individuals may take the gamble.
Question 2
The relative price of a unit of cloth in the small isolated country of Moribundia is 5 units of food. When then central city, Mudhole, puts in an airstrip, the country is able to engage in trade.
If the relative price of cloth in the outside world is 3 units of food, then Moribundia will export ________ and ________ factors used in the production of ________ will benefit. A) food; immobile; food
B) food; mobile; food
C) cloth; immobile; cloth
D) cloth; mobile; cloth
E) food; immobile; cloth
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