Category: Economics

Question 13A system is only as good as the output is random.TrueFalse

➤ Why use capital rationing to maximize owners’ value?
Capital rationing forces firms to allocate scarce funds to projects that add the most present value. Managers rank opportunities by NPV, profitability index, and risk‑adjusted cash flows. This approach prevents low‑return investments, safeguards shareholder value, and keeps leverage and the cost of capital under control.

➤ Why do imaginary audience and personal fable appear during formal operational thought?
These tendencies arise from rising abstract thought and heightened self-reflection. Adolescents can imagine others’ perspectives but may overestimate social attention, creating an imaginary audience. They also form grand narratives about the self, the personal fable, which fuels feelings of uniqueness and risk-taking. Both link to identity formation and social cognition development.

Price does not matter when determining consumer equilibrium.TrueFalse

➤ How does self-report determine psychological constructs?
Self-report uses structured questions and rating scales to capture attitudes, beliefs, emotions, symptoms, and personality traits. Items are designed to map onto specific constructs and scored using validated rules. Psychometric checks like reliability, factor analysis, and criterion validity help infer levels and support comparisons across people or groups.