There is an old saying that "The proof of the pudding is in the eating," which means that by definition good decisions work out well and poor decisions work out badly. This question asks you to consider this the wisdom of this saying
a. Your friends live in a city where it often rains in May. Nonetheless, they plan a May outdoor wedding and have no backup plan if it does rain. The weather turns out to be lovely on their wedding day. Do you think your friends were being rational when they made their wedding plans? Explain.
b. You usually have to see a doctor several times each year. You decided to buy health insurance at the start of last year. It turns out you were never sick last year and never had to go the doctor. Do you think you were being rational when you decided to buy health insurance? Explain.
c. Given your answers to the first two parts of this question, do you agree or disagree that "The proof of the pudding is in the eating?" Explain.
a. Your friends probably have not optimized, i.e. they were not rational. There was a good chance of rain on their wedding day and they had no backup plan if it did rain. Given the information available when they made their plans, they made a poor decision.
b. You probably were being rational when you bought health insurance. You usually have to see a doctor several times each year and without insurance you would have to pay for those visits to the doctor. Given the information available when you made your plan, you made a good decision.
c. Sometimes the proof is not in the pudding. Sometimes poor decisions work out well (your friends live in a rainy city but planned an outdoor wedding); sometimes good decisions work out poorly (you bought health insurance that you never used.
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When demand is perfectly inelastic, the demand curve is
A) horizontal. B) vertical. C) upward sloping. D) downward sloping.
One reason for the success that firms have in getting the government to erect and maintain barriers to foreign competition is members of Congress who engage in logrolling, where members in districts with protected industries
A) agree to trade votes on issues that concern other members in order to uphold tariffs. B) are permitted to not only cast their own votes but also cast votes for other Congressional members in their home state with respect to any bills involving the protected industry. C) are legally allowed to give cash payments to other members of Congress to secure their support for the protected industry. D) can bypass presidential approval of a bill involving the protected industry and have members of Congress directly sign the bill into law.