Which of the following statements is true?An individual's future spending decreases when she lends money.An individual's future spending increases when she borrows money.An economic agent borrows to move her spending from the future to the present.An economic agent borrows to move her spending from the present to the future. Loss aversion refers to the idea that people ________.generally tend to avoid risky activitiesare more prone to making losses than gains in day-to-day transactionspsychologically weight a loss more heavily than they psychologically weight a gainare unwilling to undertake expenditures that reduce the probability of future losses Which of the following is an example of adverse selection?Overgrazing of a common piece of landA passenger traveling in a subway without a ticketA customer buying a defective appliance from a used goods marketThe generation of hazardous waste by the production of a good More people started building houses in the earthquake-prone regions of Polonia after its government launched a compensation scheme for houses damaged in earthquakes in these regions. This is an example of ________.adverse selectiona positive externalitymoral hazardherd behavior The consumer surplus enjoyed by the winner of a first-price auction is equal to the difference between ________.her value for the item being auctioned and the value of the lowest bidher bid and the second-highest bidher maximum willingness to pay for the good and her bidher bid and the market price of the good According to the ________, as long as property rights are clearly defined, two agents can always bargain to reach the efficient outcome.Coase theoremRicardian theory on rentrevenue equivalence theoremenvelope theorem

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following statements is true?

An individual's future spending decreases when she lends money.
An individual's future spending increases when she borrows money.
An economic agent borrows to move her spending from the future to the present.
An economic agent borrows to move her spending from the present to the future.

Loss aversion refers to the idea that people ________.

generally tend to avoid risky activities
are more prone to making losses than gains in day-to-day transactions
psychologically weight a loss more heavily than they psychologically weight a gain
are unwilling to undertake expenditures that reduce the probability of future losses

Which of the following is an example of adverse selection?

Overgrazing of a common piece of land
A passenger traveling in a subway without a ticket
A customer buying a defective appliance from a used goods market
The generation of hazardous waste by the production of a good

More people started building houses in the earthquake-prone regions of Polonia after its government launched a compensation scheme for houses damaged in earthquakes in these regions. This is an example of ________.

adverse selection
a positive externality
moral hazard
herd behavior

The consumer surplus enjoyed by the winner of a first-price auction is equal to the difference between ________.

her value for the item being auctioned and the value of the lowest bid
her bid and the second-highest bid
her maximum willingness to pay for the good and her bid
her bid and the market price of the good

According to the ________, as long as property rights are clearly defined, two agents can always bargain to reach the efficient outcome.

Coase theorem
Ricardian theory on rent
revenue equivalence theorem
envelope theorem

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