Which of the following statements is true of optimization?
A) Optimization analysis only relates to the financial budget of an economic agent.
B) Individuals who optimize do not consider costs when choosing the most feasible alternative.
C) Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits.
D) Economic agents who optimize attempt to choose the best feasible option, given the information that they have.
D
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Oscar and Felix room together in an apartment in New York City. Oscar is very messy and Felix is obsessed with neatness. Felix cannot stand a messy apartment and is even willing to pay Oscar $50 per week for him to clean up after himself
Oscar hates to clean up so much that he is willing to pay Felix $30 per week to maintain his messy habits. If Felix has the right to a clean apartment explain why the apartment will be clean. If Oscar has the right to remain messy explain why the apartment will still be clean.
Why do convex indifference curve have a negative slope?
A) because to keep utility constant, a consumer must get more of one good if she is to give up some of the other B) because scarcity implies that it is not possible to consume more of one good without giving up some of the other C) because consumers take market prices as given D) because consumers face a budget constraint
A pizza shop owner needs to buy a pizza oven and is deciding between a new one and a used one. If he buys an older used one it will generate $4,000 of net income for 3 years. If he buys a new one it will generate $5,000 of net income for 4 years. If the
interest rate is 10%, what is the difference in value between the two ovens? (Assume that each year's revenue is received at the end of the year.) a. $793.83 b. $2,577.10 c. $6,252.25 d. $2,777.78 e. $1,000
Which of the following would cause the money demand curve to shift to the right?
A. A decrease in GDP B. Inflation C. An increase in interest rates D. A technological advance