Suppose That There Are Two Cities That Are Alike in Every

question 75

Multiple Choice

Suppose that there are two cities that are alike in every way except that one city has significantly better weather than the other city. Call the city with good weather Good-Weather City (GWC) and the other Bad-Weather City (BWC) . Assume that the median price of a home in the two cities is originally the same. If the marginal utility of living in GWC is 500 and the marginal utility of living in BWC is 300, to make themselves better off economic theory tells us that

• A)at least some people will move from BWC to GWC, which will make housing prices rise in GWC and BWC.
• B)at least some people will move from GWC to BWC, which make housing prices rise in BWC and GWC.
• C)at least some people will move from BWC to GWC, which will make housing prices rise in GWC and fall in BWC.
• D)at least some people will move from GWC to BWC, which will make housing prices rise in BWC and fall in GWC.

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Definitions:

Cognitive Representations

Mental models or symbols that individuals use to understand and interpret the world around them.

Consensus

A general agreement among the members of a group or community.

Averaging

A statistical method used to combine or consolidate multiple values or measurements into a single mean or average value.

Risky Shift

The tendency for groups to make decisions that are more extreme, including riskier or more cautious, than the initial leanings of its members.