Which one of the following is the best example of someone acting according to the assumptions of the traditional neoclassical model?    -Dori studies hard for her test so she can eventually land a great job.   -Alenia buys groceries for her sick neighbor out of kindness.    -Marc buys a pack of cigarettes out of habit.    -Chip buys an exercise machine based on a TV ad, even though research has shown that the machine is ineffective.

Daniel Kahneman and the late Amos Tversky are considered to be the founders of modern behavioural economics and finance. In recognition of their work, Kahneman was awarded the Nobel prize in economics in 2002. Reflect on the following points: Are economic agents rational? and What can psychology teach us that will enable us to understand and possibly predict, economic agents’ behaviour? How can “heuristics and biases” have an effect on economic decisions? To what extent is Kahneman’s work relevant to financial decisions?

What does Chang mean when he describes Neoclassical economics as being more "versatile" than other schools of economic thought? You may answer in a paragraph or two.

Suppose you and your friend go out for dinner. Your friend orders a cheeseburger and fries. When your food first arrives, you ask your friend if you can have one of his fries. He looks at you like you are crazy and says, "No!" Then a few minutes later, after you both have started eating, you ask again, and your friend reluctantly says, "Sure. Go ahead."   An economist's explanation for your friend's change of heart is most likely to be that:     Your friend's total utility declines as he eats more fries, so he's more likely to share with you after he's eaten a few. Your friend's marginal utility from eating additional fries declines as he eats more of them, so he's more likely to share with you after he's eaten a few. Your friend's total utility increases as he eats more fries, so he's more likely to share with you after he's eaten a few. Your friend's marginal utility from eating additional fries increases as he eats more of them, so he's more likely to share with you…