Which of the following best describes an assumption economists make about human behavior?
A) They assume that individuals act rationally all the time in all circumstances.
B) They assume that rational behavior is useful in explaining choices people make even though people may not behave rationally all the time.
C) They assume that people take into account the question of fairness in all decisions they make.
D) They assume that individuals act randomly.
Answer: B
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In an extreme hypothetical instance in which the price change of a good elicited no change in quantity demanded, we would say that the item is
A) perfectly elastic. B) perfectly inelastic. C) infinitely elastic. D) unitary elastic.
Lucy and Lincoln are salespeople working for the same company with equal skills, ability, and experience. Both are paid a small base salary but the majority of their compensation is in the form of a commission, which is a percentage of the sales they make. Lucy earns more each year than Lincoln. What can you conclude about Lucy and Lincoln?
A person tends to be ______________ likely to lose her temper with a boss than with a friend because the opportunity cost of losing her temper with her boss tends to be _____________ than the opportunity cost of losing her temper with her friend
A) less; higher B) more; higher C) less; lower D) more; lower
"Ordinary least squares" is a technique that can be used to
A) identify the best model. B) determine which variables in a model are endogenous and which are exogenous. C) obtain a bar graph showing successive quarterly increases in output. D) obtain a line describing consumption behavior in the real world. E) determine the direction of causation between consumption and income.