Which of the Following Statements Best Illustrates the Misperception Effect

question 118

Multiple Choice

Which of the following statements best illustrates the misperception effect?

• A)Without the misperception effect, you would not expect the output of cotton to rise when its price has risen 20 percent while other prices have risen 22 percent.
• B)Without the misperception effect, you would not expect the output of cotton to rise when its price has risen 20 percent while other prices have risen 10 percent.
• C)Without the misperception effect, you would not expect the output of cotton to rise when its price has risen 20 percent while other prices have risen 5 percent.
• D)Without the misperception effect, you would not expect the output of cotton to rise when its price has risen 20 percent while other prices have risen 12 percent.

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Definitions:

Circular-Flow Diagram

A visual model that illustrates the flow of goods and services and money between households and firms in an economy.

Household

An individual or group of people living together and making joint decisions regarding consumption and finances.

Circular-Flow Diagram

A visualization of the economy that shows how dollars flow through markets among households and firms, highlighting the interactions between product and resource markets.

Factor Market

A factor market is the marketplace where productive resources like labor, capital, and natural resources are bought and sold.