Behavioral economics
a. is a subfield of psychology that has partially replaced traditional economic analysis
b. is a subfield of economics that explains how people behavior
c. is a subfield of economics that incorporates insights from psychology and sociology
d. provides support for the traditional economic theory of rational utility maximization
e. predicts that demand curves slope upward
C
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A. can convey useful information to consumers. B. can cause perceived differences that don't exist and drive prices up. C. can increase competition in the marketplace and lower prices. D. All of these statements are true.
In the long run, large and continuing budget surpluses
a. mean higher taxes and a lower standard of living b. mean a larger money supply and higher interest rates c. are a problem because they crowd out private spending d. permit the government to lower taxes, thereby encouraging work, investment, and saving e. mean a larger money supply and lower interest rates
If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then according to the averaging equation, the value of price elasticity of demand in absolute terms is
a. 0.33 b. 2.33 c. 0.25 d. 3 e. 0.66
Why might an equation that has always predicted accurately in the past prove to be wrong following a policy change?
a. Because the policy may change people's behavior and invalidate the equation. b. Because people's expectations may cease to be rational. c. Because uncertainty means that every equation contains some degree of error. d. Because the policy change may affect economic variables not contained in the equation.