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Chapter 1: Part (b) (page 7)
How do you suppose the higher taxes have affected the incentive for Greek residents to engage in tax avoidance, or legally reduce tax liabilities, including earning less income that is subjected to taxation?
It has increased subsequently.
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Discuss the difference between microeconomics and macroeconomics.
Explain which is the independent variable and which is the dependent variable for each of the following examples.
(a) Once you determine the price of a notebook at the college bookstore, you will decide how many notebooks to buy.
(b) You will decide how many credit hours to register for this semester once the university tells you how many work-study hours you will be assigned.
(c) You anticipate earning a higher grade on your next economics exam because you studied more hours in the weeks preceding the exam.
For each of the following approaches that an economist might follow in examining a decision-making process, identify whether the approach relies on the rationality assumption or on the assumption of bounded rationality:
(a) To make predictions about how many apps a person will download onto her tablet device, an economist presumes that the individual faces limitations that make it impossible for her to examine every possible choice among relevant apps.
(b) In evaluating the price that an individual will be willing to pay for a given quantity of a particular type of healthcare service, a researcher assumes that the person considers all relevant health care options in pursuit of his own long-term satisfaction with resulting health outcomes.
(c) To determine the amount of time that a person will decide to devote to watching online videos each week, an economist makes the assumption that the individual will feel overwhelmed by the sheer volume of videos available online and will respond by using a rule of thumb.
Why do you suppose that economists sometimes disagree about whether to classify freelancers who provide paid consulting services to businesses as "workers" or "firms"?
Under what circumstances might people appear to use rules of thumb, as suggested by the assumption of bounded rationality, even though they really were behaving in a manner suggested by the rationality assumption?
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