Answer the following statements true (T) or false (F)
1. The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise and stay at the new higher level.
2. The anchoring effect suggests that when people are made to think of large abstract numbers before they go shopping, many of them will subsequently be willing to pay higher prices for stuff.
3. The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs - as in "grass is greener on the other side".
4. "Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.
5. The status quo effect suggests that giving people more options is always good for them.
1. FALSE
2. TRUE
3. FALSE
4. TRUE
5. FALSE
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A marginal cost pricing rule sets marginal cost equal to
A) minimum average variable cost. B) price. C) average cost. D) marginal revenue. E) the smaller of price or marginal revenue.
Tax evasion is more likely to occur when people feel that their tax dollars are not being used properly.
A. True B. False C. Uncertain
Which of the following accurately describes how earnings from capital eventually get paid to households?
a. Households can own a stock of capital and rent it to firms. b. Households lend money to firms, who then pay interest to the households. c. Households that own stock in firms receive dividends. d. All of the above are correct.
Suppose that Industry X has two firms with equal market shares, and Industry Y has three firms with 65 percent, 30 percent, and 5 percent market shares, respectively. Which of the following is TRUE?
A) The HHI for Industry X is 50 higher than the HHI for Industry Y. B) The HHI for Industry X is 150 lower than the HHI for Industry Y. C) The HHI for Industry X is 100 higher than the HHI for Industry Y. D) The HHI is the same between Industry X and Industry Y.