Suppose a survey is taken concerning car safety. According to the survey, people strongly desire safer cars and indicate they are willing to pay substantially more for safer cars. Using this information, one auto firm adds numerous safety features to its
car, raising the price by several thousand dollars. Sales drop sharply, and the firm loses profits. What went wrong?
What will be an ideal response?
The automaker was relying on what people say rather than on what they do. An economic model would have tried to predict whether the expected gains from driving safer cars would have been great enough for consumers to pay the higher price. Economic models are models of behavior and not models about how people think or whether people's views directly affect their actions. Also, they did not account for other factors
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One could argue that GDP is not a good measure of the standard of living in a nation because it ________.
A. excludes payments for pollution control equipment B. does not account for the size of the population C. does not account for the cost of police protection D. includes the cost of health insurance
An example of a heuristic is:
A. predatory lending. B. a framing device. C. common sense. D. a rule of thumb.
When most people talk about believing in equality of income, they mean they believe in equality of:
A. after-tax income for comparably endowed individuals. B. before-tax income for comparably endowed individuals. C. effort for comparably endowed individuals. D. opportunity for comparably endowed individuals.
Consider the statement, "The number of beers consumed the night before a test affects the grade." In this statement
A) beer is the dependent variable and test grade is the independent variable. B) beer is the independent variable and test grade is the dependent variable. C) both beer and grade are dependent variables. D) both beer and grade are independent variables.