Which pitfall to sound economic reasoning is illustrated when a person comments that "capitalists focus only on profits and don't care about their workers"?
A. Abstraction
B. Biases
C. The fallacy of composition
D. Confusing correlation and causation
Answer: B
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A ________ is the price at which a trading partner is indifferent between making the trade and not doing so
A) market value B) reservation value C) shadow value D) discounted value
A seller is willing to sell 5 units of a good at a minimum price of $1 per unit. The reservation value of the seller in this case is:
A) $1. B) $5. C) $6. D) $10.
In a closed economy, a decrease in government spending while taxes remain the same will be accompanied by
A) a decrease in private investment and an increase in privates saving. B) an increase in private investment and a decrease in private savings. C) a decrease in private investment only. D) an increase in private savings only.
The law of diminishing marginal utility means that: a. marginal utility is maximized when consumers get the same amount of total utility from every good they consume. b. total utility is maximized when consumers get the same amount of marginal utility from the last unit of every good they consume. c. beyond some point, added units of a product provide lower and lower amounts of marginal
utility. d. a consumer would get less utility from the last unit of a good consumed when that good costs $3 than when it costs $1.