homework_1_solutions

homework_1_solutions - Problem Set 1. Answer key. Problem 1...

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Problem Set 1. Answer key. Problem 1 . a) Rationality => prefer more to less of a good thing b) Individual because government decisions are heavily influenced by the bargaining process and the competing interests of many constituencies. c) i) because we don’t know everything = lack full info ii) risk = (cost of bad outcome)*(probability of a bad outcome) iii) market participants set the probability of a bad outcome = 0 d) rationality => want the most of a good at the least cost Problem 2. a) micro = study of individual consumers, firms, and markets. (e.g. = pricing of cars, presence of competition in markets or not, etc.) macro = study of the entire economic system and how government is involved in the economy to promote certain economic goals. (e.g. government budgeting, and/or market regulation, how to deal with inflation and/or unemployment, etc.) b) micro – households, firms, consumers, industry macro – consumption, investment, government (consumers and business in aggregate)
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This note was uploaded on 05/22/2010 for the course ECON 51 taught by Professor Leachman during the Fall '08 term at Duke.

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homework_1_solutions - Problem Set 1. Answer key. Problem 1...

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