Steve Is Offered an Investment Where for Every $1

question 23

Multiple Choice

Steve is offered an investment where for every $1.00 invested today, he will receive $1.10 at the end of each of the next five years. Steve concludes that in five years he will have $1.10 for every $1.00 invested and that this investment will increase his personal value. What is Steve's major error in reasoning when making this decision?

• A) He ignores the fact that the costs and benefits of the investment are not stated in the same terms.
• B) He ignores the benefits of consuming the $1.00 today against the benefits of consuming the $1.00 five years from now.
• C) He fails to consider the costs of not consuming the $1.00 today.
• D) He considers that the value of the cash he may have in the future is the same as the value of cash he has today.

Identify factors that distinguish monopolies from perfectly competitive markets.

Describe how monopolies determine their profit-maximizing level of output and price.

Explain the role of public utilities and natural monopolies in the economy.

Analyze the impact of monopolistic practices on efficiency and market outcomes.

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Definitions:

Average Total Cost

Total production expenses per unit of output, calculated by dividing the production costs by the quantity produced.

Mixers

Devices used to blend or mix ingredients together in cooking or in beverage preparation; also refers to non-alcoholic beverages mixed with alcoholic drinks.

Cakes

Baked goods made from ingredients such as flour, sugar, and eggs, often sweet and served as dessert or for special occasions.

Average Total Cost

The total cost per unit of output, found by dividing the total cost by the quantity of output.