In order to predict behavior, economic models must be realistic.
Answer the following statement true (T) or false (F)
False
Rationale: Economic models do not have to be realistic. Models that make certain assumptions may help us to predict behavior.
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An example of moral hazard is
a. workers working diligently even though the boss is not looking b. health care insured dieting and exercising c. drivers of safer cars turning their phones off before driving d. borrowers investing their loan proceeds differently than the bank requires
Bob and Bill can make 16 toys each if they devote 8 working hours in a day. Further, Bob can repair 4 cars and Bill can repair 2 cars, if they devote 8 working hours in a day. What is the opportunity cost of repairing one car to Bob?
a. 10 toys b. 8 toys c. 16 toys d. 12 toys e. 4 toys
The recession of 1982 was largely caused
a. on purpose by the Federal Reserve's decision to raise interest rates to combat inflation. b. on purpose by the Federal Reserve's decision to cut interest rates to combat inflation. c. by accident as a result of the Reagan era tax cuts. d. by dramatically rising oil prices. e. on purpose by the Reagan Administration's decision to raise interest rates to combat inflation.
If the price of gasoline rises at the Exxon gas station at a busy intersection, the Mobil station at the same intersection will experience
a. an outward shift of the demand curve it faces b. an inward shift of the demand curve it faces c. a rightward movement along the same demand curve it faces d. a leftward movement along the same demand curve it faces e. neither a shift in nor a movement along the demand curve it faces