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1) Suppose that Joe enjoys and repeatedly does stupid things like getting heavily into debt and insulting police officers. Do these actions constitute systematic errors? If he gets what he wants each time, are his stupid actions even considered to be errors by economists? Explain.
2) Why do behavioural economists consider it helpful to base a theory of economic behavior on the actual mental processes that people use to make decisions? Why do neoclassical economists not care about whether a theory incorporates those actual mental processes?
3) What does behavioural economics have to say about each of the following statements?
a) "Nobody is truly charitable--they just give money to show off."
b) "America has a ruthless capitalist system. Considerations of fairness are totally ignored."
c) "Selfish people always get ahead. It's like nobody even notices!"
What are the two firms' best response functions? Show you calculations and what will be the market price, the market output, the output of each firm and the firms' profits?
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Keds-the traditional maker of white canvas tennis shoes-was near oblivion in the early 1980s because competitors like Nike, Reebok, Adidas, and Brooks took away many of its customers. If you were at the helm of Keds, what would you have done to turn ..
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