"As soon as a mayor announced his/her 'get tough on crime' policy on New Year's day, criminals got scared and the crime rate went down." Suppose that the lower crime rate was actually caused by freezing cold temperatures in January?it was just too cold for anybody to be out robbing other people. Which fundamental hazard of the economic way of thinking did the mayor make?
A. believing that what's good for one person is good for the whole group (the fallacy of composition)
B. failing to take into account the benefits of crime (the payoff fallacy)
C. believing that association is the same as causation
D. failing to understand the difference between positive and normative economics.
Answer: C
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The figure above shows the market for college education. Left to itself without any government intervention, a competitive market would create a deadweight loss equal to
A) zero. B) the area d. C) the area a + c. D) the area b + c. E) the area b + d.
When a firm is hiring an input such that the marginal revenue product of the input is equal to the marginal factor cost of the input, the firm
A) should be expanding output. B) is hiring too little of the input. C) is maximizing economic profit. D) is producing too much output.
In this example, why is the graph for total utility curved whereas the graph for marginal utility is straight?
a. Total utility has a constant positive slope whereas marginal utility has a constant negative slope.
b. The slope of the total utility graph is positive but constantly decreasing at the rate shown on the marginal utility graph.
c. The slope of the marginal utility graph is negative but constantly increasing at the rate show on the total utility graph.
d. Marginal utility has a constant positive slope whereas totally utility has a constant negative slope.
The institution of private property encourages:
A. easy exchange of some property because a formal title or deed exists. B. lack of easy exchange because ownership is sometimes hard to prove. C. lack of incentives because the owner is responsible for maintenance costs. D. lack of maintenance because people are not forced by law to do it.