Based on your understanding of your roommate's preferences, you predict that he will select the spaghetti for his lunch at the cafeteria, but instead he chooses the gyros. How do you describe this event in terms of economic theory?
A) Your roommate is irrational.
B) Your roommate does not know what is in his own best interests.
C) You roommate does not know his own preferences as well as you do.
D) You constructed a model that made a prediction, and the prediction was refuted.
Question 2
According to the classical model
A) long-term unemployment is unavoidable.
B) unemployment is a temporary phenomenon.
C) unemployment only exists during periods of war.
D) the natural rate of unemployment is zero.
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