According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by
A) using a simple rule of thumb to choose among a subset of easiest-to-evaluate options.
B) using the ceteris paribus assumption to assist in simplifying and examining each of the possible options.
C) utilizing readily available empirical evidence to assist in evaluating every option.
D) assessing every available choice by developing sophisticated theories regarding each option.
A
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Four stores have a problem with theft and security is a public good. Let S stand for the number of person-hours of security patrols per week. The marginal benefit of security patrols to each of the stores is given by the formula MB = 200 - 2S. Patrols cost $20 per hour. If each store provided security independently, how much would each store provide?
A. 90 person-hours of patrols per week B. 100 person-hours of patrols per week C. 92.5 person-hours of patrols per week D. 97.5 person-hours of patrols per week
A measure of consumer surplus in any market is
a. total expenditure on the good b. the area above the supply curve and below the price c. the area beneath the demand curve d. the area beneath the demand curve and above the price e. the market price
Governments invest in infrastructure to:
A. to increase the productivity of businesses. B. to spur economic growth. C. to increase the growth rate of GDP per capita. D. All of these are reasons why the government provides infrastructure.
The latest Kanye West album is available to be downloaded for $11.99. Is this price a rationing device?
a. No, the album will be sold to anyone having the required number of dollars. b. Yes, many will not buy the album because they are unwilling to sacrifice other things $11.99 will buy. c. No, for price to be a rationing device, it must be so high that only one unit of the item is sold. d. Yes, since that is a reasonable price.