Rational self-interest means
A) always increasing your wealth.
B) pursuing what makes you better off.
C) pursuing activities that maximize income.
D) always pursuing activities that are consistent with your faith.
B
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When the price level increases there is ________ movement along the aggregate demand curve because the buying power of money ________
A) a downward; increases B) an upward; increases C) an upward; decreases D) no; does not change E) a downward; decreases
Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions. Which of the following could explain this observation?
A) Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product's value. B) People measure the value of a good in terms of its purchase price. C) Sunk costs have a higher opportunity cost than costs that can be recovered. D) If consumers maximize their utility, it makes sense to consider the full purchase price of a product in their consumption decisions.
If borrowers with the most risky investment projects seek bank loans in higher proportion to those borrowers with the safest investment projects, banks are said to face the problem of
A) adverse credit risk. B) adverse selection. C) moral hazard. D) lemon lenders.
Which of the following statements represents a key point about strategic decision making?
A) Strategy is less important in nonconstant sum games than in constant sum games. B) The payoffs in cooperative games will always be higher than in noncooperative games. C) It is essential to understand your opponent's point of view and to deduce his or her likely responses to your actions. D) Optimal strategies in cooperative games always lead to economically efficient outcomes.