A. tendency for policies with high short-run benefits to have high long-run costs. B. fallacy that what is true for the short run must be true for the long run. C. tendency to regularly misjudge in the present what you will do in the future. D.
tendency to misjudge how long it will take to accomplish a future task.
A. Time inconsistency.
B. Availability heuristic.
C. Self-serving bias.
D. System 2 processes dominating decision making.
Answer: A
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Suppose a country has 100 westerners and 100 easterners. A westerner can produce either 6 units of food or 2 units of national defense; an easterner can produce either 2 units of food or 1 unit of national defense
a. Show that easterners have a comparative advantage in the production of defense. b. Suppose this country has decided it wants to produce 60 units of defense. Would the country have more food to consume if the westerners produced these 60 units of defense or if the easterners produced this defense? c. Why should you have anticipated your answer to part (b) of this question? d. Now suppose this country institutes a draft and chooses people for the military randomly. Suppose further that it drafts 20 westerners and 20 easterners (who together will produce 60 units of defense). How much food will the country produce if it chooses to have a military draft? e. Compare the cost in terms of foregone food production under a draft to the cost under a volunteer army where the country pays the easterners enough to persuade them to become soldiers.
Explain the economic assumption that "people are rational."
What will be an ideal response?