In laboratory experiments, researchers have found that the behavior of Proposers and Responders in the ultimatum game is consistent with people:
A. acting in their own narrow self-interest.
B. valuing fairness.
C. not understanding the game.
D. behaving irrationally.
Answer: B
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Any point on a country's production possibilities frontier represents a combination of two goods that an economy
a. will never be able to produce. b. can produce using all available resources and technology. c. can produce using some portion, but not all, of its resources and technology. d. may be able to produce in the future with more resources and/or superior technology.
Suppose the government imposes a per unit tax on an item whose production process creates a negative externality. Suppose the tax is exactly the value of the marginal externality cost. If the government now uses the tax revenue to clean up pollution from this process, the market will:
A. have internalized all costs and benefits. B. have used a command-and-control policy rather than a market-based policy. C. underproduce the good that is resulting in the negative externality. D. reduce the costs to the buyers and sellers of the good.
In the principal-agent relationship, the agent is
A) the owner of a resource that has hired another party to act on his behalf. B) the person who is placed in control over resources that are not his own, with a contractual obligation to use these resources in the interests of some other party. C) the person who is placed in control over resources that are not his own and agrees to compensate the resource owner in the event of outcomes that do not satisfy the resource owner. D) the person who places his resources in professional hands in exchange for the professional's promise to act on the resource owner's behalf.
If the marginal propensity to consume is .9, then the marginal propensity to save must be:
A. 1. B. .1. C. 1.1. D. .9.