Explain the endowment effect
What will be an ideal response?
The endowment effect refers to the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay to buy the good if they did not already own it. This inconsistency comes from a failure to take into account nonmonetary opportunity costs.
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Improving the education level of the labor force will
A. shift the production possibilities curve inward. B. not shift the production possibilities curve since the total size of the labor force has not been changed. C. shift the production possibilities curve outward. D. cause a movement from a point inside the production possibilities curve to a point on the curve.
The introduction of a tariff will be expected to
A. reduce imports. B. increase the prices of exports but have no effect on the level of imports. C. reduce the prices of exports but have no effect on the level of imports. D. increase exports.
As you move down the production possibility frontier, the absolute value of the marginal rate of transformation
A. increases. B. initially decreases, then increases. C. decreases. D. initially increases, then decreases.
Referring to Table 4.2, Box J should be filled with
A. $0. B. $9.00. C. $5.67. D. $17.