Does the principle of optimization imply that people always make the best choices?
What will be an ideal response?
Optimization is a good description of almost all human behavior, but this doesn't mean that people are always perfect calculators. Our decisions are roughly equal to the choices we would make if we always optimized. To an economist, optimization is a good approximation of the decisions that people make.
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In a two-good economy, the price of video games is $40 and the price of energy drinks is $2. If the annual output of this economy is 100 video games and 500 drinks, the GDP is ________
A) $50,080 B) $25,200 C) $5,000 D) $20,200 E) none of the above
Here is what we know about a household: wages $25,000, unemployment insurance benefits $3,000, dividend income $4,000, income tax $5,000. What is the contribution to GDP of this household following the expenditure approach?
A) $24,000 B) $25,000 C) $28,000 D) $29,000