Question

Answer the following multiple choice questions.

Rational behavior implies that

a. a person recognizes the real cost of acquiring or doing something.
b. a person will choose among preferences so as to maximize his or her satisfaction.
c. a person can rank preferences.
d. a person has preferences and can identify them.
e. All of the above.

In extremely large groups (like that of country or a state), tough bosses (leaders) can help overcome all but the following problems.
a. free rider problems
b. shirking problems
c. the tragedy of the commons
d. a tough boss cannot overcome any of them.

In economics, the cost of doing something is
a. the value of the next best opportunity not taken.
b. the listed dollar cost.
c. the money, out of pocket expenditure
d. all of the above.

A good example of a public good is
a. lollypop.
b. beautification program from Central Park in New York City.
c. textbook that is used to increase peope's knowledge of economics.
d. hamburger.
e. a grocery store.

The economic theory of groups predicts that small groups are likely to be more prevalent and successful in achieving their goals than large groups because
a. large groups will have members with diverse interests.
b. large groups are hard for leaders to direct and control.
c. the free rider problem is less likely to occur in small groups that large groups.
d. all of the above.

Answer 1

Answer 1) Rational Behavior implies that while making a decision an individual takes into account all the relevant information, has defined preference, can rank them, and wants to maximize his satisfaction. Hence Option E, all above is the answer.

Answer 2) A tough leader or boss cannot resolving the problem of free rider or tragedy of commons. Hence Option D is the answer.

Answer 3) Cost of doing something implies the monetary cost, opportunity cost, and list cost. Hence Option D is the answer.

Answer 4) Public good is defined by its characteristic of being non-rival and non-excludable in nature. Hence Option B is the correct answer i.e. beautification program from Central Park in New York City.

Answer 5) Smaller groups are efficient decision maker with respect to larger groups because larger groups suffer from polciy paralysis due to diverse interest and limited control over the members. Hence Option D is the answer.