Julio Borrows $250 from Ricky

question 156

Multiple Choice

Julio borrows $250 from Ricky. Ricky wants to make a 5% real return on his money, so they both agree on a 5% interest rate paid next year. Both don't anticipate the 5% inflation next year. In this case

• A) Ricky is better off.
• B) Julio will pay $15 a year from now on.
• C) Julio is better off.
• D) Ricky will receive more than 5% of real rate of return a year from now.

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Definitions:

Herfindahl Index

A measure of the size of companies in relation to the industry and an indicator of the amount of competition among them.

Market Shares

The proportion of total sales or revenue in a market accounted for by a particular company, indicating its dominance in the market.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing the excess that remains after all costs have been accounted for.

Monopolistically Competitive

Describes a market structure where many companies sell products that are similar but not identical, allowing for competition based on factors other than price, such as quality and branding.