Why do preference reversals occur?
What will be an ideal response?
Preference reversals occur because of present bias. Present bias implies that an individual places much higher weight on present consumption than future consumption. So, if a consumer is not able to consume a good today, he may not want to consume it tomorrow as the utility received from consumption is much smaller than what he would have received if he consumed the good today.
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A marginal tax rate is
A) the fraction of each additional dollar of income that must be paid in taxes. B) the incremental income one must earn to offset each additional dollar of tax. C) the ratio of a change in income to a change in taxes paid. D) the fraction of income that must be paid in taxes.
Suppose Winston's annual salary as an accountant is $60,000, and his financial assets generate $4,000 per year in interest. One day, after deciding to be his own boss, he quits his job and uses his financial assets to establish a consulting business, which he runs out of his home. To run the business, he outlays $8,000 in cash to cover all the costs involved with running the business, and earns revenues of $150,000. What are Winston's economic profits?
A. $78,000 B. $142,000 C. $138,000 D. $150,000
From an initial long-run equilibrium, if aggregate demand grows faster than long-run and short-run aggregate supply, then Congress and the president would most likely
A) decrease the required reserve ratio. B) decrease government spending. C) decrease oil prices. D) decrease tax rates.
A commercial bank lists net worth as
A. retained earnings. B. a liability. C. excess reserves. D. an asset.