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1. Risk-averse persons sometimes prefer to play some gambles even if they know that those gambles are not fair, i.e., on average people lose by playing them. One plausible explanation for this seemingly paradoxical phenomenon is that:
The economic theory of uncertainty is not correct.
Gambling has entertaining effects which are not treated explicitly as part of the payoffs.
People's actions are not reasonable.
None of the statements is correct.
2. Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?
MC = MR
P = MC
Positive long run profits
P = MC and positive long run profits
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