Which of the following assumptions best explains how people make decisions, according to economists?
a. People make the best choice they can because they do not want to make themselves worse off.
b. Money incentives matter the most because no matter how much people have they want more.
c. Few people are systematic about decision making, and many disregard their own values.
d. Individuals consider past experiences but fail to evaluate expected future circumstances.
a. People make the best choice they can because they do not want to make themselves worse off.
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Refer to the scenario above. Which of the following statements is true?
A) The discounted value of $3,400 to be received after five years is $3,000. B) Tom's return from investing in his friend's project is higher than the amount received from the bank after five years. C) Tom's return from investing in the bank is higher than the amount received from his friend's project after five years. D) The returns on both investments are likely to be similar and Tom should be indifferent about investing in either options.
Bonnie gets her hair cut at her usual salon and is very happy with the results. Later that afternoon, she goes to the mall and sees that a hair salon is giving away free haircuts only on that day. If Bonnie does not take advantage of the giveaway, it is because the:
A. marginal utility of the next haircut would be zero or negative. B. marginal utility of the next haircut would increase. C. marginal utility of the next haircut would be zero or positive. D. total utility of both haircuts would be zero or negative.
Price floors and price ceilings:
A. cause the supply and demand curves to shift until equilibrium is established. B. both cause shortages. C. both cause surpluses. D. interfere with the rationing function of prices.
How might fiscal policy be used to correct a recessionary gap?
A. Taxes would be cut to stimulate aggregate demand. B. The exchange rate would be adjusted to encourage imports. C. The interest rate would be adjusted to encourage saving. D. The exchange rate would be adjusted to discourage imports.