Behavioral economists argue that asset price bubbles and other examples of herd behavior may be due to biases resulting from the law of small numbers. In particular, the investors may observe unusually ________ returns for some asset and use this limited information to ________ the probability that returns will be high in the future. A) […]
A simple linear demand function may be stated as Q = a – bP + cI where Q is quantity demanded, P is the product price, and I is consumer income. To compute an appropriate value for c, we can use observed values for Q and I and then set the estimated income elasticity of […]
The demand for sirloin steak is probably more elastic than the demand for all meat because A) steak is very expensive. B) people are worried about cholesterol. C) cattle raising is not very profitable. D) there are more substitutes for sirloin steak than for all meats. ANSWER D
In general, the current stock of pollutants (St) may be modeled as St = Et + (1 – d)St-1 where d is the ________ and Et is the ________. A) social discount rate, previous stock level B) social discount rate, current emissions C) stock dissipation rate, previous stock level D) stock dissipation rate, current emissions […]
Refer to Scenario 7.3. What is the total cost of producing 200 units of output? A) 100 B) 1000 C) 1500 D) 2000 E) none of the above ANSWER B
Refer to Figure 9.8. A $50 tariff would result in domestic consumption of A) 600, domestic production of 100, and imports of 500. B) 500, domestic production of 200, and imports of 300. C) 400, domestic production of 300, and imports of 100. D) 300, domestic production of 400, and exports of 100. E) 200, […]
When contemplating the purchase of a resource, the pure monopsonist should do which of the following to maximize profit? A) Purchase enough to make the marginal expenditure equal to the marginal revenue product. B) Purchase enough to make the average expenditure equal to the marginal revenue product. C) Pay a wage equal to the value […]
The slope of the production possibilities frontier is A) positive. B) negative. C) zero. D) undefined. ANSWER B
In an economy which produces two goods X and Y, using two inputs L and K, efficient input use occurs when A) MRTSLKX = MRSLKY B) MRTXY = MRSXY C) MRSX/PX = MRSY/PY D) MRTSLKX = MRTSLKY ANSWER D
Refer to Scenario 14.4. How much will the monopsonist pay each worker? A) 0 B) 78 C) 83 D) 92 E) 100 ANSWER C
