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) is rational: she should not discard a valuable item.
B) 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.
C) supports the endowment effect which states that ownership of an item makes it more valuable.
D) is rational because the more you pay for an item the more valuable it is.
Answer: B
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Which of the followings does NOT describe the money market in the ISLM model?
A) money demand function B) investment function C) money market equilibrium condition D) money supply
If supply increases and demand decreases
A) the market clearing price definitely rises, and the equilibrium quantity definitely falls. B) the market clearing price definitely rises, and the effect on the equilibrium quantity is indeterminate. C) the market clearing price definitely falls, and the effect on the equilibrium quantity is indeterminate. D) the effect on the market clearing price is indeterminate, and the equilibrium quantity definitely falls.
A good that is neither rival nor exclusive is called
a. a private good b. a public good c. a quasi-private good d. an external good e. an open access good
The quantity of medical care demanded appears to be highly sensitive to changes in price
a. True b. False Indicate whether the statement is true or false