Edgar and Felicity are players in an ultimatum game for $100, where Felicity is the proposer and Edgar is the responder. Suppose that Felicity proposes that she receive $95, while Edgar receives only $5. How would behavioral economists expect Edgar to
respond?
A. Even though Edgar would be better off having $5 versus nothing, Edgar will likely see the
offer as unfair and reject it.
B. Edgar will accept the $5, as rejecting it would be economically irrational.
C. Edgar will suggest a counteroffer that he would accept.
D. Edgar will accept the offer if he is thinking with brain System 1 but reject it if thinking with
brain System 2.
Answer: A
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a. the increase in the quantity of inputs needed to produce a given quantity of output. b. the reduction in the quantity of inputs needed to produce a given quantity of output. c. the reduction in the productivity of a sector of the economy that has become obsolete. d. an increase in the labor to capital ratio in any production process. e. the growth in the natural resource endowment.
When what people pay does not necessarily reflect the real value they put on a good, it is likely that the:
A. good is nonrivalrous. B. good is easily excludable. C. free rider problem exists. D. good will be oversupplied.
A regulated natural monopolist allowed to earn a "fair" rate of return would produce to the point at which
A) the price per unit equals the long-run average cost. B) the marginal revenue curve meets the long-run average cost curve. C) the marginal revenue curve meets the long-run marginal cost curve. D) the price per unit equals its marginal revenue.
An increase in the quantity of tea demanded occurs if:
A. the income of tea drinkers increases. B. the population of tea drinkers grows. C. the price of the tea falls. D. the price of coffee rises.