Sara looks into her closet and discovers a pair of like-new shoes she no longer wears because they give her blisters. From the economist's perspective, was Sara behaving rationally when she bought those shoes?
A) No. If any of a person's decisions have poor results, that person is irrational.
B) Yes, as long as Sara didn't intentionally purchase blister-causing shoes.
C) No. The rationality assumption states that rational people never make mistakes.
D) It's not clear because psychology, not economics, deals with the rationality assumption.
B
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When the percentage change in the quantity supplied is twice the percentage change in price, then supply is
A) elastic. B) inelastic. C) unit elastic. D) perfectly inelastic. E) perfectly elastic.
Any bank that uses deposits to make loans: a. operates on a 100 percent reserve system
b. operates on a fractional reserve system. c. does not operate on a reserve system. d. does not keep reserves in its vaults. e. charges an interest rate determined by the reserve ratio.