Last month Laura saw the value of her stock portfolio rise by $20,000. This month she saw the value of her portfolio decline by $20,000. According to behavioral economics:
A. the positive utility Laura received from seeing her portfolio value rise was equal to the
disutility she felt when its value declined.
B. Laura should not invest in stocks unless the utility she receives from gains is at least as
great as the disutility she feels from losses.
C. the positive utility Laura received from seeing her portfolio value rise was greater than the
disutility she felt when its value declined.
D. the positive utility Laura received from seeing her portfolio value rise was less than the
disutility she felt when its value declined.
Answer: D
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Bananas and apples are substitutes. When the price of bananas rises, and a technological advance in apple production occurs at the same time
A) the equilibrium price of apples rises and the equilibrium quantity of apples falls. B) the equilibrium price of apples rises and the equilibrium quantity of apples might rise or fall. C) the equilibrium quantity of apples rises and the equilibrium price of apples might rise or fall. D) the equilibrium price of apples rises and the equilibrium quantity of apples rises.
A technological improvement lowers the cost of producing corn. As a result, the price of a pound of corn ________ and the quantity of corn ________
A) rises; increases B) rises; decreases C) falls; increases D) falls; decreases E) falls; does not change
Name some important lessons learned from the financial crisis
In year 1 the average price of X is $10, and in year 2 the average price of X is $23. If consumers buy more units of X in year 2 than in year 1, it follows that
A) the law of supply does not hold for good X. B) demand for good X could be higher in year 2 than in year 1. C) supply of good X could be less in year 2 than in year 1. D) good X buyers have received an increase in income between year 1 and year 2, and good X is a normal good. E) b and d