-Leisure Land Produces Only Sunscreen and Camel Rides

question 422

Multiple Choice

-Leisure Land produces only sunscreen and camel rides. The table shows the marginal benefit and marginal cost schedules for sunscreen and camel rides. The allocatively efficient number of camel rides is ________.

• A) 1 ride per day because the marginal benefit exceeds the marginal cost by as much as possible
• B) 2 rides per day
• C) 4 rides per day
• D) 6 rides per day because that is the maximum number of rides

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Definitions:

Expected Return

The anticipated profit or loss from an investment, calculated as an average of all possible outcomes weighted by their likelihood of occurrence.

Reward To Risk Ratio

A metric used by investors to compare the expected returns of an investment to the amount of risk undertaken to capture these returns.

Risk Premium

The additional return expected by an investor for taking a higher risk.

Risk-Free Rate

The theoretical return on investment with no risk of financial loss, typically represented by government bonds.