Suppose you conduct a study in which subjects are asked the following questions: 1. "Imagine that you have decided to go to a basketball game where the cost is $25 per ticket. As you enter the arena, you discover that you have lost your $25. Would you still pay $25 for a ticket?" 2. "Imagine that you have decided to go to a basketball game and you pay $25 for the ticket. As you are walking into the arena you realize that you have lost your ticket. Would you pay another $25 for another ticket?" You find that 90% of your subjects answered "Yes" to the second question, compared to the 50% that answered "Yes" to the first question. This is an example of:
A. the default effect.
B. the endowment effect.
C. narrow framing.
D. dynamic inconsistency.
C. narrow framing.
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Refer to the table below. What sum of money should be deposited today in an account that earns 3 percent interest to make each of the five payments above and, when the last payment is made, there will be no money left in the account?
The above table shows a 5 year payment plan. Each payment is made at the end of the year, so after one year, a payment of $1,000 is made, after two years another payment of $1,500 is made and so on. The interest rate is 3 percent.
A) $9,886.70
B) $9,912.56
C) $11,000.00
D) $9,723.45
Briefly explain what economists mean when they refer to the stock market as a random walk.
What will be an ideal response?
Table 9.1Disposable IncomeTotal Consumption(Billions of dollars per year)(Billions of dollars per year)$0$50200210Which of the following represents the consumption function consistent with the data in Table 9.1?
A. C = $160 billion + 0.91YD. B. C = $50 billion + 0.80YD. C. C = $50 billion + 0.76YD. D. C = $160 billion + 0.80YD.
The shift of labor out of agriculture to industry in the United States has tended to:
A. reduce unemployment in the industrial sector. B. increase labor productivity. C. reduce the rate of productivity growth. D. increase unemployment in the agriculture sector.