Instructions to students: All questions are compulsory.
All questions have the same amount of marks.
Choose the TRUE answer:
The theory of rational addiction (Becker and Murphy, 1980) has been criticized for ignoring:
a)that individual time preferences are constant
b)that tolerance is a characteristic that only develops after long term use (above ten years) of drugs
c)that individual time preferences may change over an individual’s lifetime
d)none of the above.
In the contest of the Grossman model, as people age their optimal health stock
________ because _________.
a)increases; people are ill more often.
b)increases; people are using more care.
c)decreases; cost of capital increases, and remaining life span decreases.
d)decreases; cost of capital decreases, and remaining life span increases.