Jim, an avid biker, broke his leg last year and will never be able to use his bike again. He was offered $100 for it last year, but Jim refused to sell it, insisting it was worth more. A year later, he's offered only $75 for it, but Jim still refuses to sell it. Jim's behavior could be explained by:
A. substitution effect.
B. limited processing power.
C. the endowment effect.
D. status quo bias.
Answer: C
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Allocative efficiency means which of the following?
a. Producing at the lowest cost b. Producing without waste c. Producing what consumers prefer d. Producing what sellers prefer
Which of the following is not an example of a principal-agent relationship?
a. a soccer player and her coach b. a man and his neighbor c. an construction worker and his foreman d. a driver and her insurance agent
If both borrowers and lenders anticipate the rate of inflation correctly, then
A. borrowers will lose real income. B. lenders will lose real income. C. both borrowers and lenders will lose real income. D. neither borrowers nor lenders will lose real income.
Two factories make wooden chairs. If the workers in factory X make each chair from start to finish and the workers in factory Y divide labor, one would assume
A. the workers in factory Y have more job satisfaction. B. factory X can take advantage of division of labor and produce more efficiently. C. factory Y can take advantage of division of labor and produce more efficiently. D. the chairs in factory X are of higher quality.