Question

Answer the following multiple choice questions:

1. Market prices are:

                a. irrelevant to rational choice

                b. an indication of how scarce items are.

                c. all money prices divided by themselves.

                d. only important to retailers.

2. What is considered “rational” by one persona may not be “rational” to another person because:

                a. of ethical considerations that give rise to different value judgments.

                b. people have different preferences

                c. of the effects on the decision rendered by considering the future.

                d. some people may have access to more information than others.

                e. All of the above.

3. There is no such thing as a free lunch, means that:

                a. money costs are always present when one acquires or does something.

                b. you always have to pay the tab.

                c. you have no choices.

                d. choices are present and a real cost is incurred when a choice is made.

                e. none of the above is true.

4. Consider the payoff matrix for the “battle of the Sexes” game captured in Table 2.3 from Microeconomics for MBAs: The Economic Way of Thinking for Managers:

The Battle of the Sexes

		Tom
		Doris	Star Wars
Marsha	Doris	100\75	60\80
	Star Wars	-40/-40	75\100

According to this information, Marsha’s b est strategy in this game (as defined solely by the indicated payoffs) is to:

                a. ask Tom to go with her to see “Hello, my name is Doris.”

                b. leave a message on Tom’s hone that she will be going to see “Doris” at a given time and to take his returned calls.

                c. leave a message on Tom’s phone that she will be going to see “Doris” at a given time and block his returned calls.

                d. agree to go see “Star Wars.”

5. According to the McKenzie and Lee textbook, in very large group settings (such as the size of a country), tough bosses (leaders) cannot overcome which of the following problem(s).:

                a. free-rider problems

                b. shirking problems

                c. tragedy of the commons

                d. all of the above.

6. Management’s snooping can raise worker wages because it can:

                a. increase overall worker productivity by reducing shirking.

                b. undercut worker morale.

                c. be distasteful to workers causing a reduction in the number of workers wanting to work.

                d. A and C.

7. The real cost of acquiring or doing something is:

                a. anything that must be given up.

                b. always stated in terms of dollars

                c. the time it takes

                d. the next highest preferred alternative that must be forgone.

                e. all of the above.

8. Institutions

                a. are the set of laws, customs and mores that affect and influence the costs and benefits of decisions.

                b. never change.

                c. are only determined through conscious efforts of many, many people.

                d. are only created by government.

9. The main difference between free market (conscious) capitalism and crony capitalism is that:

                a. only cronly capitalism appeals to self-interest and greed, while there is no greed in conscious capitalism.

                b. crony capitalism enlists the power of the state to achieve its goals, while the market is based upon voluntary cooperation.

                c. only free market capitalism uses incentives to fulfill its goals, while governmental institutions never use incentives to achieve goals.

                d. crony capitalism uses corporations, while conscious capitalism uses small shops.

                e. all of the above.

10. Opportunity cost

                a. never exist if there are alternatives.

                b. is irrelevant to rational choice.

                c. is the value of the next best alternative foregone in making a choice.

                d. never applies to government or public policy.

Answer 1

1.Correct option is b. As higher the scarcity, higher is the price.Prices are important for retailers as well as consumers. Choice is made mainly based on price, hence all other options are not correct.

2. Option E is correct as all options are correct for rationality.

3.Option d is correct. Option a is incorrect as free goods do not have opportunity costs.We always have choices and paying can be done by someone else.

4. Pure strategy makes both better off. Option d is ruled out as it makes Masha worse off. Option b is correct as Masha will be able to communicate that Doris is a choice made and Tom should join. Option a may make Masha change mind if Tom insists.

Answer 2

Number 2 is E.