Junior collects baseball cards. He owns one Felix Hernandez card that sells in most shops for $15. He is interested in buying a different Felix card that also sells for $15. According to behavioral economics:
A. Junior should value the two cards equally and be willing to trade one for the other.
B. the availability heuristic will cause Junior to value more highly the card he doesn't have.
C. the endowment effect would suggest that Junior would not be willing to trade the card he
has for the card he doesn't have.
D. prospect theory says he will buy the second card as both have the potential to appreciate
in value.
Answer: C
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A person is more likely to increase labor supply in response to an increase in the real wage, the ________ is the income effect and the ________ is the substitution effect
A) larger; larger B) larger; smaller C) smaller; larger D) smaller; smaller
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a. shift the industry supply curve to the right. b. cause the market price to fall. c. reduce the profits of existing firms in the industry. d. All of the above are correct.
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