In economics, money is an example of capital.
a. True
b. False
QUESTION 2Economics studies how decision makers use scarce resources to satisfy unlimited wants.
a. True
b. False
QUESTION 3Economics is best defined as the study of how individuals decide to use limited resources in an attempt to satisfy unlimited wants.
a. True
b. False
QUESTION 4Return to the market for cigarettes from the previous questions. Suppose the government implements the tax you found in the previous question. But suppose the government is making a mistake. The true demand curve is in fact , and this is not a result of any behavioral bias. Compute the deadweight loss of the government's tax policy.
a. DWL = 0.
b. DWL = 500.
c. DWL = 1,000
d. DWL = 2,500.
QUESTION 5Return to the market for cigarettes from the previous question. What per-unit tax could the government levy to eliminate the deadweight loss from the behavioral bias?
a. 0
b. 1
c. 50
d. 100
QUESTION 6Return to the case of Jan, the hyperbolic discounter from the previous question. Suppose she can sign a contract that requires her to give up money equivalent to a loss of X utils if she does not undertake the action. Assume she does not behave consistent with her plans without this contract. How high would the contractual value of X have to be to prevent her inconsistency?
a. C B/2.
b. B.
c. C.
d. B + C.
QUESTION 7Return to the case of Jan, the hyperbolic discounter from the previous question. What values of B and C will lead her to be consistent with a plan to undertake the action?
a. C < B < 2C.
b. B < C.
c. B > 2C.
d. B < C < 2B.
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