Explain what economists mean by rational choice and think of three choices that you've made today that are rational
What will be an ideal response?
A rational choice is one that compares the costs and benefits of the different actions and then chooses the action that has the greatest benefit over cost for the person making the choice. Three rational choices made by students include: a) The choice to skip breakfast to go to class. In this case the benefit is the higher grade in the class and the cost is the breakfast forgone. b) The choice to stop talking with a friend on the phone and start studying for an impending exam. In this case the benefit is the resulting higher grade in the class and the cost is the conversation forgone. c) The choice to do laundry today rather than watch television. In this case the benefit is the fact the student will have clean clothes to wear and the cost is the loss of the entertainment the television show would have provided.
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According to Edward Denison, the United States has experienced
a. diseconomies of scale. b. economies of scale. c. constant returns to scale. d. None of the above
If a resource is underemployed, it
a. is being used in production, but not in its most productive use b. is essentially unemployed c. is not considered a productive resource d. cannot be used as a factor of production e. must be a labor resource
A shift from S1 to S2 causes equilibrium price to __________ and quantity to __________.
A. rise; rise
B. fall; fall
C. rise; fall
D. fall; rise
A profit-maximizing perfectly competitive firm must decide:
A. only on which industry to join, taking price and output as fixed. B. both what price to charge and how much to produce. C. only on how much to produce, taking price as fixed. D. only on what price to charge, taking output as fixed.