Linda committed a traffic violation that resulted in an accident. She learns first that the violation will result in a $500 fine; she then learns that she will have to pay another $500 for damage caused in the accident. According to prospect theory,
A. she will suffer as much disutility from paying for the accident damage as she does from
paying the fine.
B. she will suffer less disutility from paying for the accident damage than from paying the fine.
C. she will suffer more disutility from paying for the accident damage than from paying the
fine.
D. she will feel less disutility from paying $1,000 than she would receive positive utility from
receiving $1,000.
Answer: B
You might also like to view...
When does an externality occur?
a. when one person's production or consumption of a good affects another person b. when a producers long-run average costs fall c. when a consumer's marginal utility from consuming a good increases d. when international trade leads to improvement in a country's economic welfare
Will a home monopolist prefer a quota or a tariff to protect its output?
a. The home monopolist will prefer a tariff, because a tariff allows it to earn higher profits than a quota. b. The home monopolist will prefer a quota, because a quota may allow it to earn higher profits than a tariff. c. It is immaterial to the home monopolist because it will earn the same higher profits with each form of protection. d. The home monopolist will prefer neither, because it earns higher profits in a free-trade situation.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, an increase in unemployment may be represented by the movement from
A. B to A. B. A to C. C. C to D. D. B to D.
Large increases in the availability of labor would likely be a source of
A. import competing growth. B. generalized growth. C. specialized growth. D. concentrated growth.