Theories or models of economic behavior are used to
a. explain very precise details about the economy
b. predict economic events and develop economic policy
c. predict consumer behavior but not market behavior
d. all of the above
Ans: b. predict economic events and develop economic policy
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If the security guard knows that the shoplifter has been caught before, his best response would be
a. Being watchful b. Sleeping on the job c. Run d. Hide
The cartel consisting of Firm A and Firm B can become unstable if: a. Firm A manages to enhance the quality of its product. b. both the firm sell homogeneous products
c. Firm B decides to decrease its output. d. both firms decide to decrease industry output.
Critics argue that society is depleting its energy resources far too quickly. The most likely explanation for this behavior is that
A. firms try to avoid making irreversible decisions about resource depletion. B. investors expect interest rates to fall continuously in the future. C. individuals tend to value their own well-being more highly than the well-being of future generations. D. people do not have what Pigou called a “defective telescopic faculty.”
The price of one currency in terms of another is called
A) the exchange rate. B) purchasing power parity. C) the terms of trade. D) a currency band.