Economists assume people behave rationally, which means that people
A. have the necessary information to always make correct decisions.
B. never make a mistake.
C. always understand the consequences of their decisions.
D. do not intentionally make decisions that make themselves worse off.
Answer: D
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Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair
When asked by her boss, Mme. Ramotswe, why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior A) supports the endowment effect which states that ownership of an item makes it more valuable. B) is rational because the more you pay for an item the more valuable it is. C) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not. D) is rational: she should not discard a valuable item.
Predatory dumping is the practice of
a. rejecting imports b. persistently selling a good in another country for a price lower than the world price c. persistently selling a good in another country for a price lower than the domestic price d. temporarily selling a good in another country for a price lower than the world price to drive out competing producers e. temporarily selling a good in another country for a price lower than the domestic price to drive out competing producers
When negative externalities exist in a market, if the producers are forced to pay a Pigouvian tax then:
A. those who interact in the market will gain surplus. B. producers will gain surplus. C. those who do not interact in the market but are affected by the externality will lose surplus. D. those who interact in the market will lose surplus.
If the price of oranges, a substitute for apples, decreases and the wages of apple workers increases, how will the equilibrium point change?