MrPierpont Has Wealth of $200,000

question 31

Multiple Choice

Mr.Pierpont has wealth of $200,000.He wants to keep at least $80,000 in bonds at all times,and will shift $10,000 into bonds from his checking account for each percentage point that the interest rate on bonds exceeds the interest rate on his checking account.Currently,he keeps $100,000 in bonds,which pay him 7%.What is the current interest rate on checking accounts?

• A)5%
• B)7%
• C)9%
• D)10%

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Definitions:

Short-Run Economic Profit

The profit earned by a firm in the short term, potentially including both actual financial gains and opportunity costs.

Average Total Cost

The total cost of production divided by the quantity of output produced; a measure of per-unit cost.

Price

The amount of money required to purchase a good or service, determined by various factors including supply and demand.

Perfectly Competitive Industry

A market structure where many firms sell identical products, entry and exit are unobstructed, and all buyers and sellers have perfect information.