Jess fixes up old cars and sells them to supplement his retirement income. Jess came across a beat-

up 1975 Corvette that she is considering rebuilding and selling. She estimates a 0.2 probability that

she will gain 15% on the deal, a 0.2 probability that she will gain 10%, and a 0.6 probability that she

will gain 5%. Jess' expected return for fixing up and selling the Corvette is

%

0 8

0-12

O 11

O 20

Let m = inflation rate, r = real interest rate, and i = nominal interest rate. Which of the following

statements is (are) TRUE?

r=i-

r= (r)(i)

i=r-M

=i+r

Which of the following requirements is necessary to practice price discrimination?

I. The firm must have market power.

I. The firm must be able to prevent arbitrage of its product.

Ill. The firm must face a perfectly elastic demand curve.

IV. The firm must operate in a perfectly competitive industry.