The assumption of rationality in economics implies that:
a. people perfectly understand their own preferences.
b. people can overcome economic obstacles in the best possible way.
c. people can make accurate calculations and they have a perfect foresight.
d. people make choices with an eye toward attaining objectives they have chosen.
D
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The owner of a scenic waterfall is trying to decide whether to rent the site to a manufacturing firm as an industrial power source or to rent it to a recreational association, which would turn the site into a park and campground
Which of the following statements is true? A) An increase in the price of fossil fuels will increase the cost of renting it to the recreation association. B) Social welfare is maximized when the owner rents to the higher bidder. C) The cost to the owner of renting to one or the other depends entirely upon the owner's preferences between economic growth and recreational facilities. D) The owner can choose without regard to cost because the site is a free natural resource. E) The owner can choose without regard to cost insofar as the waterfall is privately owned.
Interest rates spreads between corporate and government bonds ________
A) are procyclical B) have the same characteristics as the government interest rate spreads C) are countercyclical D) all of the above E) none of the above
If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response?
a. decrease taxes b. decrease government purchases c. decrease the federal deficit d. all of the above
An import quota on a product protects domestic industries by:
A. reducing the foreign supply to the domestic market and, thereby, raising the domestic price. B. increasing the foreign supply to the domestic market and, thereby, lowering the domestic price. C. increasing the domestic demand for the product and, thereby, increasing its price. D. providing the incentive for domestic producers to improve the efficiency of their operation and, thereby, reduce their per-unit costs of production.