The reason that diamonds cost more than water is
A. most consumers consume little water.
B. diamonds are more beautiful than water.
C. the marginal utility of each diamond a consumer purchases is quite high due to the small amount of diamonds that most consumers purchase.
D. water is a necessity.
Answer: C
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Which of the following assumptions were made by the Cournot model of oligopoly?
a. Each seller psychoanalyzes the competition and decides how to react in all possible situations. b. Each seller psychoanalyzes the competition and exactly predicts the output decisions of the competitors. c. Each seller chooses its own output and believes the others in the market will respond to its choices. d. Each seller chooses its own output and believes the others in the market will not respond to its choices.
Your friend notices that U.S. auto production and U.S. population growth have moved together over several decades. He reasons that one way to slow population growth is for the government to order the auto makers to cut back on production. You gently point out to him that he
a. is correct only when the economy is in a recession b. has mistakenly inferred causation from observed correlation c. has ignored secondary effects d. has committed the fallacy of composition e. is correct only when the United States enjoys economic growth
What role does population growth play in economic development?
What will be an ideal response?
The idea that people will not consciously make decisions that make them worse off is known as
A) rationality assumption.
B) the decision duality.
C) Adam Smith's doctrine.
D) incentive assumption.