Q&A Hero

Q: One method of reducing the moral hazard problem in healthcare insurance would be to allow insurance companies to a. increase the cost for coverage. b. agree to cover preventive care completely. c. increase the number of doctors eligible for payment. d. limit the number of new customers. e. require a medical exam before offering coverage.

Q: Requiring patients to pay a portion of the cost of the medical care they receive is designed to reduce the severity ofa. moral hazard. b. diminishing returns. c. adverse selection.d. the principal-agent problem.e. market failure.

Q: How can an insurance company reduce the moral hazard problem? a. Impose a coinsurance where patients pay for a percentage of their medical care expenses, pay none of the medical expenses associated with preventive care, and raise deductibles. b. Impose a coinsurance where patients pay for a percentage of their medical care expenses, pay all of the medical expenses associated with preventive care, and raise deductibles. c. Eliminate patients responsibility to pay for a percentage of their medical care expenses, pay all of the medical expenses associated with preventive care, and raise deductibles. d. Impose a coinsurance where patients pay for a percentage of their medical care expenses, pay all of the medical expenses associated with preventive care, and lower deductibles. e. There is no way to reduce the moral hazard problem.

Q: ________ would be minimized if hospital policy based a physicians salary on how healthy patients were following treatment by that doctor rather than the number of patients treated per year.a. Moral hazard b. Adverse selection c. Diminishing returnsd. Market failuree. The principal-agent problem

Q: One method of reducing the moral hazard problem in health care insurance would be a. for all insurance companies to increase the cost for coverage. b. to allow insurance companies to agree to cover preventive care completely. c. to allow insurance companies to impose payment limits on preventable conditions. d. to allow insurance companies to limit the number of new customers. e. to allow insurance companies to require a medical exam before offering coverage.

Q: The problem that arises when a party that is protected from risk behaves differently than if it were not protected from risk isa. moral hazard. b. diminishing returns. c. the principal-agent problem.d. adverse selection.e. market failure.

Q: Noelles mother has always said, If you want something done right, you have to do it yourself. What type of asymmetric information problem does her statement reflect? a. diminishing returns b. adverse selection c. moral hazard d. principal-agent problem e. an adverse selection problem that became a principal-agent problem

Q: Instead of referring to a sample of comments a doctor has provided on his own website, Catrina has decided instead to rely on reviews from friends who have been his patients. What type of asymmetric information problem is Catrina trying to correct by soliciting comments from friends? a. diminishing returns b. adverse selection c. moral hazard d. principal-agent problem e. an adverse selection problem that became a principal-agent problem

Q: After attending medical school, Georgiana has decided to encourage all of her family members to see her for their healthcare needs because she knows their health problems and has an incentive to keep them alive and as healthy as possible. What type of asymmetric information problem is Georgiana trying to correct by having her family members see her for care? a. principal-agent problem b. diminishing returns c. adverse selection d. moral hazard e. an adverse selection problem that became a principal-agent problem

Q: Instead of changing the oil in his car by himself, Ashton takes his car to a 10-minute oil change store. Although its fast and inexpensive, what type of problem might Ashton encounter? a. diminishing returns b. adverse selection c. principal-agent problem d. symmetric information e. an adverse selection problem that became a principal-agent problem

Q: After winning the lottery, Fez has decided to move from his apartment to a mansion. He has hired a professional company to move his belongings. What type of problem should Fez be most concerned about? a. diminishing returns b. adverse selection c. principal-agent problem d. symmetric information e. an adverse selection problem that became a principal-agent problem

Q: A doctor may order more tests than necessary for a patient. This reflects which of the following problems?a. symmetric information b. diminishing returns c. adverse selectiond. principal-agent probleme. market failure

Q: What would be the consequence for patients of a law that limited the amount of annual profit a health insurance company could earn? a. The principal-agent problem would become less severe. b. The adverse selection problem would become more severe. c. The moral hazard problem would become more severe. d. The adverse selection problem would become less severe. e. The moral hazard problem would become less severe.

Q: In order to reduce the principal-agent problem, an insurance company can a. give patients access to medical records, require doctors to justify tests, and pass reforms to medical malpractice laws. b. give patients only limited access to medical records, force doctors to justify tests, and pass reforms to medical malpractice laws. c. give patients access to medical records, allow doctors to determine which medical tests are appropriate, and pass reforms to medical malpractice laws. d. give patients access to medical records, require doctors to justify tests, and repeal medical malpractice laws. e. do nothing; there is no way to reduce the principal agent problem.

Q: The problem that arises when an agent does not complete a task in the way intended by the principal is calleda. the principal-agent problem. b. immoral hazard. c. diminishing returns.d. adverse selection.e. market failure.

Q: What would happen if insurance companies offered to pay for patients to receive a second opinion before a medical procedure? a. The principal agent problem would become less severe. b. The adverse selection problem would become more severe. c. The moral hazard problem would become more severe. d. The adverse selection problem would become less severe. e. The moral hazard problem would become less severe.

Q: After many horrendous first dates arranged through a dating website where Cecily provided minimal information, Cecily has decided to ask her good friends, who know all about her, to help her find a companion. By relying on her friends, Cecily is trying to reduce a(n) a. moral hazard problem that became a principal agent problem. b. principal agent problem that became an adverse selection problem. c. principal agent problem. d. adverse selection problem. e. moral hazard problem.

Q: Insurance companies that sell insurance to individuals are able to minimize the severity of the adverse selection problem by a. guaranteeing that all applicants receive coverage. b. requiring a medical exam. c. limiting the amounts that doctors are paid. d. requiring patients to use a health maintenance organization (HMO). e. expediting payment of benefits.

Q: What form does the adverse selection problem take in the healthcare market? a. Buyers can buy as much health care as they want. b. Sellers can sell as much health care as they want. c. Buyers and sellers face delays when interacting. d. Sellers are less likely to provide care because they know it is expensive. e. Buyers that are less healthy are more likely to seek insurance because they anticipate needing medical care.

Q: A key component in the Affordable Care Act passed in the United States is the requirement that individuals must either obtain basic medical insurance coverage or pay a tax. Which of the following problems was this mandate designed to reduce?a. moral hazard b. adverse selection c. diminishing returnsd. market failuree. principal agent problem

Q: How can an insurance company reduce the adverse selection problem? a. The adverse selection problem cant be reduced. b. An easy insurance application process could be used, unhealthy individuals could be refused coverage, and large groups of individuals could be insured. c. An extensive insurance application process could be used, unhealthy individuals could be refused coverage, and only individuals would be insured. d. An extensive insurance application process could be used, hardly anyone would be refused coverage, and large groups of individuals could be insured. e. An extensive insurance application process could be used, unhealthy individuals would be refused coverage, and large groups of individuals could be insured.

Q: ________ exist(s) whenever one party has access to some aspect of product quality that the other party does not have.a. Adverse selection b. Immoral hazard c. Moral hazardd. Diminishing returnse. Symmetric information

Q: ________ exist(s) whenever one party has more information than the other party.a. Moral hazard b. Immoral hazard c. Asymmetric informationd. Symmetric informatione. Diminishing returns

Q: The adverse selection problem and the principal-agent problem are examples ofa. diminishing returns. b. asymmetric information. c. moral hazard.d. third-party participation.e. market failures.

Q: What would happen if, as a business owner, Toderick forced his employees to join an HMO? a. Medical care costs would likely be higher than if Todericks employees could see any doctor and receive any test they wanted because unnecessary care would be fully covered. b. Medical care costs would likely be lower than if Todericks employees could see any doctor and receive any test they wanted because the amount of unnecessary care would be reduced. c. Medical care costs would likely be unaffected by whether employees join an HMO or not. d. Medical care costs would likely be lower because the less healthy would be encouraged to receive care. e. Medical care costs would likely be lower because the healthy would be discouraged from receiving care.

Q: Which of the following is a negative consequence to having insurance companies exist in a society? a. The asymmetric problem is reduced by insuring large groups of people. b. They are able to pool risks and give the sick the same access to medical care as the healthy. c. When they have insurance, individuals will consume more medical care than if they have to pay the full cost for care. d. When they have insurance, individuals will consume less medical care than if they have to pay the full cost for care. e. By insuring large groups of people, the asymmetric problem is increased.

Q: A distortion in the healthcare market can occur when a. health insurance companies require individuals to have a primary care doctor. b. doctors are rewarded for reducing a patients recovery time after surgery. c. the involvement of health maintenance organizations discourages efficiency in health care expenditures. d. the existence of healthcare insurance encourages customers to seek more health care than they otherwise would. e. when there is a lack of restrictions for entry into the market for delivering health care.

Q: Use the following graph to answer the following questions:The Medicare and Medicaid programs represent ________ percent of medical spending in the United States.a. 5 b. 12 c. 24d. 33e. 51

Q: Use the following graph to answer the following questions:The ________ is the often the intermediary between consumers and producers in the healthcare market.a. employer b. insurance company c. hospitald. pharmacye. doctor

Q: Use the following graph to answer the following questions:What makes the healthcare market different from other markets?a. The consumers and producers in the healthcare market interact with one another more frequently in terms of prices and the amount to pay compared to other markets.b. The consumers and producers in the healthcare market rarely interact with one another in terms of prices and the amount to pay compared to other markets.c. Producers in the healthcare market are encouraged to underproduce.d. Consumers in the healthcare market are encouraged to underconsume.e. Consumers in the healthcare market are encouraged to underproduce.

Q: Use the following graph to answer the following questions:Which point on the graph best represents a country that has no health-care infrastructure and where a small investment in health care would initially deliver significant health gains?a. Point A b. Point B c. Point Cd. Point De. Point E

Q: Which of the following is one of the central questions that society must answer regarding medical care is? a. What is the optimal mix of medical care expenses? b. Should funding be increased? c. Should funding be tied to medical results? d. To what extent should funding be decreased? e. Should health insurance companies be abolished?

Q: Current life expectancy in the United States isa. almost 85 years. b. over 80 years. c. about 70 years.d. almost 80 years.e. almost 90 years.

Q: What is the result of consistently increasing spending by patients, insurance companies, and the government on medical care in the United States? a. The benefits to medical care increase at a decreasing rate. b. The marginal benefits to medical care initially increase at an increasing rate but then increase at a decreasing rate. c. The marginal benefits to medical care increase at an increasing rate. d. The marginal benefit to medical care decreases at an increasing rate. e. The marginal benefit to medical care is constant.

Q: The largest component of personal healthcare expenditures in the United States isa. nursing home care. b. hospital care. c. prescription drugs.d. home health care.e. physician and clinical services.

Q: What is one cited reason why healthcare expenditures are so high in the United States? a. Medicare and Medicaid reduce the supply of medical care. b. Doctors know patients are likely covered by insurance, which reduces the demand for medical care. c. People engage in unhealthy habits. d. Insurance companies attempt to control medical care costs by capping expenditures. e. Patients covered by insurance consume too little health care.

Q: On an annual basis, healthcare expenditures in the United States are approximatelya. $100 billion. b. $500 billion. c. $750 billion.d. $1 trillion.e. $3 trillion.

Q: Healthcare represents approximately ________ percent of the gross domestic product (GDP) of the United States.a. 10 b. 17 c. 25d. 33e. 50

Q: On a global perspective, per capita expenditures on health care are greater in the United States than a. both Canada and Mexico. b. in Canada, but less than in Mexico. c. in Mexico, but less than in Canada. d. neither Canada nor Mexico. e. in Mexico, but approximately equal to expenditures in Canada.

Q: Total expenditures on health care are a. greater in the United States than in Mexico, but less than in Canada. b. greater in the United States than in Canada, but less than in Mexico. c. less in the United States than in Canada and Mexico. d. approximately equal in the United States, Canada, and Mexico. e. greater in the United States than in Canada and Mexico.

Q: A central issue that society must deal with regarding health care a. concerns the optimal mix of expenditures for the various categories of health care (prescription drugs, nursing home care, home health care, and medical products). b. is whether health care insurance companies should be involved in the healthcare market. c. is whether the government should be involved in the healthcare market. d. is whether people should be required to seek preventive care. e. is whether medical care in the emergency room should be delivered only to those who can pay for it.

Q: CHAPTER 18: Health Insurance and Health CareWhat is a central healthcare question that society must find an answer for?a. Should health care insurance companies be involved in the health care market?b. Is the marginal benefit of spending more on prevention greater or less than the marginal benefit of spending on the extension of life?c. Should the government be involved in the health care market?d. Should people be required to seek preventive care?e. Should medical care in the emergency room be delivered only to those who can pay for it?

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Q: The field of economics that draws on insights from psychology to expand models of individual decision-making is ________ economics.a. psychology b. behavioral c. personality traitd. activity-basede. decision-making optimization

Q: Behavioral economics a. is the least controversial field of economics. b. involves people separating small losses from large losses. c. uses the results of psychology experiments to apply to models of individual decision-making. d. uses the result of sociology observations to apply to models of individual decision-making. e. is the most controversial field of economics.

Q: Economists make the general assumption that people a. can be both rational and irrational, but the model must account for either. b. are irrational, although modeling such irrationalities is nearly impossible. c. are rational, but the assumption rarely fits reality. d. are irrational, although general correlations exist in behavioral patterns. e. are rational, but their behavior doesnt always follow this assumption.

Q: A fully rational choice would require a. consumers to be risk-neutral. b. choices to be independent of relevant alternatives. c. consumers to be risk-averse. d. choices to be independent of irrelevant alternatives. e. consumers to not consider recent outcomes.

Q: According to prospect theory, people a. separate small gains from large losses. b. separate small losses from large losses. c. separate small gains from large gains. d. dont separate losses from gains. e. separate all losses from all gains.

Q: Differences in time preferences depend on a. social or cultural preferences. b. uncertainty regarding the future. c. the time at which preferences are established. d. differences in expected future outcomes. e. differences in likelihood of preference reversals.

Q: If Ronnie calculates that $150 in the future is worth $100 today, then he is showing a ________ time preference.a. positive b. neutral c. negatived. increasinge. decreasing

Q: If someone wears his or her favorite clothes first, then he or she is most likely to have a ________ time preference.a. positive b. neutral c. negatived. increasinge. decreasing

Q: A school raffle sells 1,000 tickets at $1 each for a $350 bookstore credit. If Ramona buys one ticket, what is her net expected value for this gamble?a. $0.65 b. $0.20 c. $350d. $0.001e. $0.35

Q: Emilie is presented the following gamble: one door has $100 behind it, another has $20 behind it, and another has $0 behind it. What is the expected value of this gamble? a. $120 b. $40 c. $20 d. $60 e. Answer requires more information.

Q: Willow, a risk-neutral person, is presented the following gamble: heads, she wins $2; tails, she loses $1. Willow should a. take the gamble but buy insurance. b. be indifferent to take or not take the gamble. c. take the gamble. d. not take the gamble. e. randomly take or not take the gamble.

Q: A rational, risk-averse person will a. sometimes refuse a fair gamble. b. always accept a fair gamble. c. consider all gambles unfair. d. always refuse a fair gamble. e. randomly refuse or accept a fair gamble.

Q: A risk-neutral consumer a. will always refuse a fair gamble. b. will always accept a fair gamble. c. avoids all risk. d. is indifferent between acceptance and refusal of a fair gamble. e. ensures that any higher risk is offset by lower risk.

Q: ________ implies that people evaluate the risks that lead to gains separately from the risks that lead to losses. a. The standard economic model b. Austrian business-cycle theory c. The theory of comparative advantage d. Insurance theory e. Prospect theory

Q: ________, as articulated by Daniel Kahneman and Amos Tversky, suggests that individuals place more emphasis on gains than losses.a. Prospect theoryb. Superior theoryc. Austrian business-cycle theoryd. The theory of comparative advantagee. Insurance theory

Q: Consider the following scenario when answering the following questions:Suppose that, in an experimental setting, 100 students are asked to choose between Gamble A and Gamble B, where:Gamble A: The student will receive $5 million with a 100 percent probability.Gamble B: The student will receive $5 million with a 51 percent probability, $10 million with a 25 percent probability, and $0 million (nothing) with a 24 percent probability.What is the expected value of Gamble A?a. $5 million b. $5.01 million c. $5.05 milliond. $10 millione. $0 million

Q: Suppose that, in an experimental setting, 100 students are asked to choose between Gamble A and Gamble B, where:Gamble A: The student will receive $5 million with a 100 percent probability.Gamble B: The student will receive $5 million with a 50 percent probability, $10 million with a 25 percent probability, and $0 million (nothing) with a 25 percent probability.A risk-neutral student isa. likely to choose Gamble A because it has a higher expected value.b. likely to choose Gamble B because it has a higher expected value.c. likely to choose Gamble A because the student will win something (as opposed to nothing) with a higher probability.d. likely to choose Gamble B because the student will win something (as opposed to nothing) with a higher probability.e. indifferent toward both Gambles A and B because they have the same expected value.

Q: Consider the following scenario when answering the following questions:Ivett and Desiree are considering playing a game called Twenties versus Fifties. In this game, Ivett will place a $20 bill on the table, and Desiree will place a $50 bill on the table. Both players will then toss a fair coin. If both Ivett and Desiree toss heads or if they both toss tails, Ivett wins the $70 on the table. If one woman tosses heads and the other tosses tails, Desiree wins the $70 on the table.For Ivett, the expected value of this game isa. $0. b. $15. c. $35.d. $70.e. $140.

Q: Economists generally assume that people make ________ decisions that ________ be modeled.a. predictable, repeatable; cannot b. predictable, repeatable; can c. unpredictable, repeatable; cand. unpredictable, repeatable; cannote. predictable, unrepeatable; cannot

Q: A person who is ________ is likely to pay more for insurance to protect against financial loss than a person who is ________. a. afflicted by the hot-hand fallacy; afflicted by the gamblers fallacy b. a risk taker; risk averse c. a risk taker; risk neutral d. risk averse; a risk taker e. risk neutral; risk averse

Q: People who are risk takers a. prefer a sure thing over a gamble with a higher expected value. b. choose the outcome with the highest expected value. c. choose the outcome with the lowest expected value. d. prefer gambles with lower expected values but potentially higher winnings over a sure thing. e. do not partake in any risky activities.

Q: People who are risk neutral a. prefer a sure thing over a gamble with a higher expected value. b. choose the outcome with the highest expected value. c. choose the outcome with the lowest expected value. d. prefer gambles with lower expected values but potentially higher winnings over a sure thing. e. do not partake in any risky activities.

Q: People who are risk averse a. prefer a sure thing over a gamble with a higher expected value. b. choose the outcome with the highest expected value. c. choose the outcome with the lowest expected value. d. prefer gambles with lower expected values but potentially higher winnings over a sure thing. e. do not partake in any risky activities.

Q: The standard economic model of consumer choice assumes that people are ________.a. risk averse b. risk loving c. risk neutrald. fairness aversee. fairness loving

Q: Proponents of fairness would likely believe that a. the poor should pay higher tax rates on their personal income than the rich do, a tax structure known as regressive taxation. b. the rich should pay higher tax rates on their personal income than the poor do, a tax structure known as progressive taxation. c. the poor should pay higher entrance fees to national parks whenever an entrance fee applies. d. a bigger, less equal economic pie is more favorable than a smaller, more equal economic pie. e. if the poor can receive free baby formula and diapers from the government, then the rich should also be able to receive free baby formula and diapers from the government.

Q: Consider the following decision tree and information when answering the following questions:The decision tree depicts two players (Jane and Aaron) playing an ultimatum game where Aaron is given $1,000 and asked to propose a way of splitting it with Jane. When Jane learns Aaronu2019s proposal, Jane chooses whether to accept or reject the split. If Jane accepts the split, both players receive the money according to Aaronu2019s split proposal. If Jane rejects the split, both players receive nothing. This game will be played only once, so Aaron does not have to worry about reciprocity when making his choice.There are four sets of payoffs at the terminal nodes of the decision tree. In each node, the dollar amount to the left of the comma represents Aaronu2019s payoff, and the dollar amount to the right of the comma represents Janeu2019s payoff.If Aaron were to offer an unfair proposal, experimental results show that Jane would likely punish him by making herself ________ off by ________ and rejecting his offer.a. worse; $1 b. better; $1 c. worse; $999d. worse; $500e. worse; $1,000

Q: Consider the following scenario when answering the following questions:Danika and Yolanda are playing an ultimatum game where Yolanda is given an eight-slice pizza and asked to propose a way of splitting it with Danika. When Danika learns Yolandas proposal, Danika chooses whether to accept or reject the split. If Danika accepts the split, both players receive the slices of pizza according to Yolandas split proposal. If Danika rejects the split, both players receive nothing. This game will be played only once, so Yolanda does not have to worry about reciprocity when making her choice. Assume that both players enjoy pizza and each would strictly prefer to eat more pizza than less.The fairest split proposal Yolanda can offer would be if Yolanda receives ________ slice(s) and Danika receives ________ slice(s).a. three; five b. one; seven c. two; fived. seven; onee. four; four

Q: Consider the following scenario when answering the following questions:Derek and Heriberto are playing an ultimatum game where Derek is given $500 and asked to propose a way of splitting it with Heriberto. When Heriberto learns Dereks proposal, Heriberto chooses whether to accept or reject the split. If Heriberto accepts the split, both players receive the money according to Dereks split proposal. If Heriberto rejects the split, both players receive nothing. This game will be played only once, so Derek does not have to worry about reciprocity when making his choice.Peggy and Marcy are playing an ultimatum game where Peggy is given $500 and asked to propose a way of splitting it with Marcy. When Marcy learns Peggys proposal, Marcy chooses whether to accept or reject the split. If Marcy accepts the split, both players receive the money according to Peggys split proposal. If Marcy rejects the split, both players receive nothing. This game will be played only once, so Peggy does not have to worry about reciprocity when making her choice.Which of the following split proposals would Marcy be most likely to accept if she and Peggy were playing the game in an experimental session and both players adhered to bounded rationalism?a. Peggy receives $449.99 and Marcy receives $50.01.b. Peggy receives $499.99 and Marcy receives $0.01.c. Peggy receives $400.00 and Marcy receives $100.00.d. Peggy receives $350.00 and Marcy receives $150.00.e. Peggy receives $250.00 and Marcy receives $250.00.

Q: Reese and Rebecca are playing an ultimatum game where Reese is given $100 and asked to propose a way of splitting it with Rebecca. When Rebecca learns Reeses proposal, she chooses whether to accept or reject the split. If Rebecca accepts the split, both players receive the money according to Reeses split proposal. If Rebecca rejects the split, both players receive nothing. This game will be played only once, so Reese does not have to worry about reciprocity when making his choice. Suppose that Reese proposes a split such that Reese will receive $99.99 and Rebecca will receive $0.01. Traditional economic theory predicts that Rebecca will a. accept the $0.01 because she values receiving $0.01 more than receiving nothing. b. accept the $0.01 because she wishes to punish Reese for proposing such an unfair split. c. reject the $0.01 because she wishes to punish Reese for proposing such an unfair split. d. reject the $0.01 and also will reject a split such that Reese receives $50.00 and Rebecca receives $50.00. e. sometimes accept the $0.01 and sometimes reject the $0.01, depending on her mood at the time.

Q: Which general observation can be inferred from the observation of real people playing the ultimatum game?a. People care about looks. b. People care about body image. c. People care about voice tone.d. People care about fairness.e. People care about respect.

Q: Jocelyn and Rhonda are playing an ultimatum game where Jocelyn is given $100 and asked to propose a way of splitting it with Rhonda. When Rhonda learns Jocelyns proposal, Rhonda chooses whether to accept or reject the split. If Rhonda accepts the split, both players receive the money according to Jocelyns split proposal. If Rhonda rejects the split, both players receive nothing. This game will be played only once, so Rhonda does not have to worry about reciprocity when making her choice. Traditional economic theory presumes that a. both players are irrational and wish to minimize the payoff to the other player. b. both players are irrational and wish to maximize their own payoff. c. both players are rational and wish to minimize their own payoff. d. both players are rational and wish to maximize their own payoff. e. the player who proposes the split is fully rational and wishes to maximize his or her own playoff, whereas the player who chooses to accept or reject the split is irrational and wishes to maximize the other players payoff.

Q: The ________ game is a common game that behavioral economists use in an experimental setting to study how fairness enters into the rational decision-making process.a. ultimatum b. prisoners dilemma c. behavioral economicsd. gamblers dilemmae. hawk-dove

Q: The ________ game is an economic experiment in which two players decide how to divide a pot of money.a. prisoners dilemma b. hawk-dove c. behavioral economicsd. ultimatume. hot-hand dilemma

Q: At the beginning of a semester, a group of five students (Marcus, Gerard, Penelope, Zendaya, and Duane) are asked to order a snack that the teacher will deliver to the students free of charge before the first class of the tenth week of the semester. The three choices are an apple, a banana, or a Snickers candy bar. The teacher collects the orders and finds that two students have ordered an apple, two students have ordered a banana, and one student has ordered a Snickers candy bar. The four students who ordered either an apple or a banana cite health consciousness as the reason for their choice. Immediately before the orders are scheduled to be delivered, the teacher informs the students that they can switch their choice and order something else from the original menu if they wish, or they can receive what they originally ordered. Which of the following scenarios is the best example of inconsistent intertemporal decision-making? a. Marcus originally ordered an apple and did not change his choice when prompted. b. Gerard ordered a banana and switched to an apple when prompted. c. Penelope ordered an apple and switched to a banana when prompted. d. Zendaya ordered a banana and switched to a Snickers candy bar when prompted. e. Duane ordered a Snickers candy bar and did not change his choice when prompted.

Q: Mario knows that, over the long run, it is in his best interest to save at least 10 percent of his paycheck for retirement. However, each time he receives his weekly paycheck of $1,000, he ends up spending it all and not depositing any to a retirement account. Mario has resolved to contact his employers Human Resources Department to set up a 401(k) work-sponsored retirement account where the 10 percent would be deducted automatically from his paycheck before it is issued to him each week. It is apparent from this information that Mario realized a. his intertemporal decisions are inconsistent and he had to take action to make them consistent. b. his intertemporal decisions are consistent and he had to take action to make them inconsistent. c. it is better for him to handle sending money to a retirement account than to rely on his employer to send the money to a retirement account on his behalf. d. he should not be saving for retirement after all because his short-run preferences to spend his entire paycheck are perfectly indicative of his long-run preferences. e. he should not worry about the future anymore because it will take care of itself.