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Why are ties so much more expensive than underwear if the demand for underwear is so much greater than the demand for ties?
What is bounded rationality? How is this concept relevant to economic modeling? What are the hot hand fallacy and the gamblers fallacy? Give an example of each.
Economists use the ultimatum game to test judgments of fairness. What result does economic theory predict?
What is prospect theory? Have you ever suffered a setback early in a process that caused you to alter your behavior later on?
You decide to take the $50,000 job. On the basis of this decision, can we tell if you are risk averse or a risk taker? Explain your response.
If Danny Ocean plays roulette and wins big, is this evidence that Danny is risk averse or a risk taker? Explain.
What idea, discussed in this chapter, explains why so many people actually vote?
What answer would you give if you believed in the gambler's fallacy? What answer would you give if you believed in the hot hand fallacy?
What would traditional economic theory predict? What would behavioral economics predict?
What type of behavior is Ray exhibiting? What does traditional utility theory say about Ray's preferences? What would a behavioral economist say?
What prediction does utility theory make about each of these activities? What concept from behavioral economics explains this behavior?
Given a choice of an extra $1,000 or a gamble with the same expected value a person prefers the $1,000. How would a behavioral economist describe this decision?
What is asymmetric information? Give one example each of adverse selection, moral hazard, and the principal-agent problem.
What are two primary reasons why healthcare demand has increased dramatically over the last 20 years?
What is a supply-related reason for high medical care costs? What are the two primary ways in which health care is rationed?
What is the second patient's marginal cost of the consultation? Which patient is more likely to see the specialist?
In your answer, consider how an increased number of safety features affects the problem of moral hazard.
A customer wants a new health insurance policy. Even though the customer's medical records. Why would the insurance company insist on a physical exam?
What would happen to the price and the number of kidneys sold in the market? Would a shortage of kidneys continue to exist?
Given what you have learned about monopoly, what prices would you expect the hospital to charge? How much care would you expect it to provide?
Set up an equation to determine the monthly amount of medical expenses at which the consumer would be indifferent between the two plans.
What is the most important component (C, I, G, or NX) of GDP? Give an example of each component.
A farmer sells cotton to a clothing company for $1,000, and the clothing company turns the cotton. How much did GDP increase as a result of these transactions?
She wants to know whether she should pay attention to nominal GDP or real GDP. Which one do you recommend, and why?
If Max receives an unemployment check, would we include that transfer payment from the government in this year's GDP? Why or why not?