A fundamental axiom of rational choice theory is
A. consumers should be risk-neutral.
B. consumers should disregard recent performance data.
C. choices should be independent of irrelevant alternatives.
D. choices should be independent of relevant alternatives.
Answer: C
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A monopolistically competitive market
a. usually has too many firms, reducing the economic profit of each firm to zero. b. usually has too few firms, reducing the product variety for consumers. c. may have too many or too few firms, and the government can intervene to achieve the optimal number of firms. d. may have too many or too few firms, but the government can do little to rectify the situation.
Implicit costs are
a. Regarded as costs by accountants, but not economists. b. Payments that a firm makes to other firms or individuals who supply resources to it. c. Opportunity costs such as the value of leisure time, or the highest and best use of the business's assets. d. Costs that vary proportionally with output.
In the loanable funds market
A. demand for loanable funds shifts right if the interest rate falls. B. demand is downward sloping because lower interest rates make more capital projects profitable. C. demand for loanable funds shifts right in the interest rate rises. D. supply is vertical because loanable funds are fixed in any relevant time frame.
When comparing perfect competition and monopoly, a major assumption made is that
A. consumers only care about the price of the good and not whether the seller is a monopoly or not. B. the costs of production are the same under monopoly as under perfect competition. C. the monopolist can make an above normal rate of return. D. the monopolist faces a downward sloping demand curve.