1. Students at expensive liberal arts colleges can often take courses at an adjacent public university at no additional charge. One of liberal arts college professors tells his students that it would make no sense to take courses from the public university because they would be losing the money they paid for tuition at the pricey private college. Given that a student has already paid her tuition at the liberal arts college, but judges that a course offering at the public university is better for her, she should take the course from:
a.the liberal arts college because she needs to get her moneyâs worth from the high tuition she has already paid.
b. the public university because the added cost of attending the public university course is zero.
c.The liberal arts college because the average tuition cost per course will rise if she takes less courses at the private school.
d. the pubic university because average tuition cost at the public university is lower than at the private college.
2. Using the reasoning of behavioral economics, which of the reasons below might best explain why companiesoffer a30-day-no-questions-asked return policy? Such a policy may convince a customer who otherwise might not make a purchase to take the product home and then the product:
a.becomes part of the customerâsendowmentat which pointloss aversionkicks in.
b. becomes a decoy and the customer decides to purchase multiple units of the good.
c. purchase price becomes a sunk cost and the customer correctly ignores it and views the good as free.
d. becomes an anchor upon which the customer inadequately adjusts for quality and ends up keeping the good even though itâs inferior to other alternatives.