A Positive Rate of Time Preference Implies That a Person

question 47

Multiple Choice

A positive rate of time preference implies that a person would value

• A) receiving $100 today more than receiving $100 one year from now.
• B) receiving $100 today less than receiving $100 one year from now.
• C) receiving $100 today equally to receiving $100 one year from now.
• D) any amount, no matter how small, today more than receiving $100 one year from now.

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Definitions:

Socially Optimal Output

The level of production of goods and services that results in the most efficient allocation of resources, typically considered at the point where marginal social cost equals marginal social benefit.

Ceiling Price

A legally imposed maximum price that can be charged for a good or service, intended to prevent prices from becoming too high.

Allocative Efficiency

A condition of distributing resources where improving the situation of one person results in the detriment of another.

Economic Profits

The surplus remaining after deducting both the explicit and implicit costs from total revenues; represents extra earnings above the next best alternative.