Answer the following statement true (T) or false (F)
1) Because of framing effects, a worker will be happy with a 5 percent raise regardless of how
much of a raise her fellow employees receive.
2) Anchoring leads people to consider irrelevant information when making decisions.
3) Isolating transactions from the overall set of consumption options is known as anchoring.
4) The endowment effect describes when people value a good more when they own it than when
they don't.
1) F
2) T
3) F
4) T
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In the long run the relevant cost is total cost
Indicate whether the statement is true or false
Electricity accounts for almost 20% of the cost of making steel. A 10% increase in electricity prices results in steel firms decreasing production and thereby demanding 5% less electricity. Over many years, technological innovations can change the way steel firms make steel and reduce the industry's energy requirements. This suggests that the steel industry's short-run elasticity of demand for
electricity is probably A) less than one in absolute terms in the short run. B) less than its long-run elasticity of demand for electricity. C) Both A and B above. D) Neither A nor B above.