Suppose that the inverse demand for a product is represented by the equation P = 50 – Q, where P is the price in Euros and Q is the annual output. Suppose that only one firm produces this product and that the marginal and average cost is €10. Calculate the profit-maximising price for this monopolist. Q2)
Q1)
Suppose that the inverse demand for a product is represented by the equation P = 50 – Q, where P is the
Calculate the profit-maximising price for this monopolist.
Q2)
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In autumn, Erling Kagge, who lives alone on an island near the North Pole, puts 50 bags of root vegetables from his harvest into a cave just before a family of polar bears goes in to hibernate. The polar bears do not eat vegetables but would attack Kagge if he approached them. As a result, he is unable to get the vegetables out before the polar bears emerge the following spring. The vegetables spoil at the same rate no matter where he stores them.
Which of the following statements best describes this behaviour?
A. Kagge’s behaviour is an example of the anchoring effect in action
B. Kagge’s behaviour is an example of the framing effect in action
C. Kagge’s behaviour is an example of the self-control effect in action.
D. Kagge’s behaviour is an example of the endowment effect in action.
E. Kagge’s behaviour is perfectly consistent with standard consumer choice theory
Q3)
A professor was teaching a course in behavioural economics to a large group of students in Freeland. One day, she told the students about a Norwegian explorer Erling Kagge who once spent a number of days alone in Antarctica. She asked the students to estimate how many days he spent on his own. The students could not look up the internet for the answer. The professor told the students to submit the last two digits of their mobile phone number with their guesses as to how many days Kagge had spent on his own in Antarctica.
Which of the following statements is true?
| A. |
Behavioural economics predicts that there will be a correlation between students' guesses and the last two digits of their phone number. This is an example of the endowment effect. |
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| B. |
Behavioural economics predicts that there will be a correlation between students' guesses and the last two digits of their phone number. This is an example of both the anchoring effect and the framing effect. |
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| C. |
Behavioural economics predicts that there will be a correlation between students' guesses and the last two digits of their phone number. This is an example of the anchoring effect. |
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| D. |
Behavioural economics predicts that there will not be any correlation between students' guesses and the last two digits of their phone number. |
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| E. |
Behavioural economics predicts that there will be a correlation between students' guesses and the last two digits of their phone number. This is an example of the framing effect. |
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