Question Economists assume that individuals behave in unpredictable ways.

behave in unpredictable ways.

will never take actions to help others.

prefer to live in a society that values fairness above all else.

are rational and respond to incentives.

Question 2. Question :

In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended steps the bank could take to deter robberies, including the installation of plastic barriers called “bandit barriers.” The police were surprised the bank did not take their advice. According to a deputy commissioner of police, “Commerce does very little of what we recommend. They’ve told our detectives they have no interest in ever putting in the barriers.”

It would seem that Commerce bank would have a strong incentive to install “bandit barriers” to deter robberies. Why wouldn’t they do it?

The banks would rather delay installation of any theft deterring equipment in anticipation of new lower cost innovations in the security devices market.

The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have “no interest in ever putting in the barriers”.

The banks are concerned that “bandit barriers” would send the wrong message to customers — that the bank is unsafe.

The banks probably resent any interference from the police department.

Question 3. Question :

Which of the following statements is true about scarcity?

Scarcity refers to the situation in which unlimited wants exceed limited resources.

Scarcity is not a problem for the wealthy.

Scarcity is only a problem when a country has too large a population.

Scarcity arises when there is a wide disparity in income distribution.

Question 4. Question :

The revenue received from the sale of an additional unit of a product

is a marginal benefit to the firm.

is called profit.

is called gross sales.

is called a net gain.

:

Question 5. Question :

Cassie’s Quilts alters, reconstructs and restores heirloom quilts. Cassie has just spent $800

purchasing, cleaning and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell the quilt “as is” now for $900. What is the marginal cost of completing the task?

$200

$500

$1,000

$1,000 plus the value of her time

Question 6. Question :

Figure 2-6

German auto producer, BMW currently produces two types of automobiles sports utility vehicles (SUVs) and coupes in its US plant. Since it opened in 1994, the company had made and continues to make several strategic production decisions. Figure 2-6 shows changes to its production possibilities frontier in response to some of these production strategies.

Refer to Figure 2-6.