Grace Makutsi finally bought a pair of blue shoes that she had been coveting for a long time. In less than a week she discovered that the shoes were uncomfortable. Grace went back to wearing her old pair and stashed away the new pair. When asked by her
boss, Mme. Ramotswe, why does she not simply give away the new pair, she said: "But I paid so much for them." Grace's behavior
A) is rational: she should not discard a valuable item.
B) ignores the fact that the purchase price is now a sunk cost and has no bearing on whether she should give them away or not.
C) supports the endowment effect which states that ownership of an item makes it more valuable.
D) is rational because the more you pay for an item the more valuable it is.
Answer: B
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Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and Gigacom moves first, what is the likely outcome in the market?
A) Both offer DSL internet service; Xenophone earns a profit of $8 million and Gigacom earns a profit of $7 million. B) Xenophone offers internet service via cable line and earns a profit of $4 million while Gigacom offers DSL internet service and earns a profit of $4.5 million. C) Xenophone offers DSL internet service and earns a profit of $5 million while Gigacom offer internet service via cable line and earns a profit of $6.5 million. D) Both offer internet service via cable line; Xenophone earns a profit of $6 million and Gigacom earns a profit of $9 million.
Refer to Table 21-2. Using the table above, what is the approximate growth rate of real GDP from 2015 to 2016?
A) -2% B) -1% C) 1% D) 2%