"Rational, self-interested people would never end up worse off by any decision they make. Obviously, people often make mistakes or have regrets. Therefore, people do not act rationally or out of self-interest." Do you agree with these statements? Why or
why not?
What will be an ideal response?
No. People may make mistakes because they often do not have enough information to make the best decision or because they are wrong about the effect of their actions. When they make a decision, given their circumstances and the information they have, they make the best choice for themselves.
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Refer to the figure below. 
In the figure, which interval represents a business cycle recession?
A. A to B B. A to C C. B to C D. B to D
Under which of the following conditions will a profit-maximizing perfectly competitive firm shut down in the short run?
A) when it is making a normal profit B) whenever its marginal cost is less than its marginal revenue C) when the price is less than its minimum average variable cost D) whenever its total cost is greater than its total revenue E) when the price is less than its minimum average total cost
With an upward sloping LM curve, a falling interest rate __________ money demand, so that an expansionary monetary policy is __________ than in the case of a vertical LM curve
A) raises; stronger B) raises; weaker C) has no effect on; stronger D) has no effect on; weaker
On average each year, about 7 percent of all firms in the United States are new and 1 percent go out of business. According to the text, luck may play a role. Which of the following reasons for failure might be attributable to luck?
A) An individual undertakes a very risky venture so that his product is first to market. B) An executive fails to undertake an investment that would have yielded great success. C) An executive focuses on the incorrect objective. D) An executive undertakes an investment just prior to a major natural catastrophe that destroys the firm's assets. E) An executive fails to perceive what customers really want.