Assume that you had a ticket for a basketball playoff game that you bought for 50, the maximum price you were willing to pay.
If a friend of yours offers to buy the ticket for 100 but you decide not to sell it, how can your decision be explained?
A) by the endowment effect
B) You expect to receive greater utility from attending the playoff game than you received from buying the ticket.
C) by the law of diminishing marginal utility
D) The income effect from the increase in the price of the ticket from 50 to 100 was greater than the substitution effect.
Question 2
The ABC Company manufactures routers that are used to provide high-speed Internet service. ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month.
Therefore
A) ABC will soon go out of business.
B) to reach minimum efficient scale ABC would have to sell at least 3,000 routers each month.
C) ABC is experiencing diminishing returns.
D) ABC is experiencing diseconomies of scale.
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