Even though conspicuous consumption can serve as a credible signal of ability, it can lead to socially inefficient outcomes because:
A. earnings and ability are very poorly correlated.
B. conspicuous consumption is not highly correlated with earnings.
C. conspicuous consumption can lead to positional arms races.
D. conspicuous consumption has been demonstrated to be poorly correlated with ability.
Answer: C
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Refer to the scenario above. If Frank discounts delayed utilities with a weight of 9/10, then which of the following statements is true?
A) He will eat both hotdogs and ice cream. B) He will eat hotdogs but avoid ice cream. C) He will eat ice cream but avoid hotdogs. D) He will avoid consuming both hotdogs and ice cream.
Price controls often generate
A) more efficient markets. B) black markets. C) rapid adjustment to market-clearing prices. D) greater price flexibility.