Scenario 16.4 - Santorini Donkeys

question 17

Multiple Choice

Scenario 16.4 - Santorini Donkeys
Sturdy little donkeys are used to carry corpulent tourists up the Santorini caldera to the town of Fira.One cruise line that routinely docks at the port is considering a plan to maintain their own donkey herd,which will cost them $15,000 per thousand tourists.The number of tourists needing this service is normally distributed,with a mean of 10,000 and a standard deviation of 3,000.Usually,this is enough donkey capacity,but occasionally the cruise line rotates a bigger ship through this route and the excursion director must purchase donkey capacity on the spot market,where is costs $20 per tourist.
-The cruise line's insurance policy limits the number of donkeys in their herd to 5,000.What bulk price should the cruise line negotiate to make the 5,000 donkey herd size optimal?

• A)$16,664 per ten thousand
• B)$16,362 per ten thousand
• C)$16,134 per ten thousand
• D)$15,978 per ten thousand

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Definitions:

Effectiveness Lag

The delay between the time a policy measure is implemented and the time the measure has its intended effect on the economy.

Activity Lag

The delay between the time a particular economic policy is enacted and the time when its full effects are observed in the economy.

Passive Policy

An economic policy approach that involves minimal intervention by the government in the economy, allowing market forces to operate without active guidance or stimulus.

Short-run Aggregate Supply

The total production of goods and services in an economy at various price levels in a short-term period, before all production factors can be varied.