Question 1

Which one of the following is NOT a key trade-off a society faces?

Accepted Answer

The question is asking for the key trade-offs a society faces. While deciding who produces goods and services is a consideration, it is not listed as a key trade-off in the options given. Instead, the key trade-offs listed are allocating goods and services, deciding which goods and services to produce, and how to produce them.

Question 2

The price of a good is

Accepted Answer

Prices of goods are usually determined through the interaction of buyers and sellers in a market. The cost of producing a good does not necessarily determine its price, as market demand and competition can also play a role. The number of buyers and sellers can also affect the price, as more competition among sellers can lead to lower prices and vice versa. Therefore, option C is the best choice.

Question 3

Explain how a market helps determine which goods and services will be produced,how to produce them,and who gets them.

Accepted Answer

A market promotes interaction between consumers and firms.This interaction will result in prices that influence the decisions of consumers and firms.

Question 4

Most microeconomic models assume that decision makers wish to

Accepted Answer

The assumption that decision makers wish to make themselves as well off as possible is known as rational self-interest, which is a key concept in microeconomics. While some individuals may act altruistically or consider the well-being of others in their decision making, the default assumption is that individuals are motivated by self-interest.

Question 5

What links the decisions of consumers and firms in a market?

Accepted Answer

Prices serve as the common factor that links the decisions of consumers and firms in a market. Consumers make decisions based on the prices of goods and services, while firms set prices based on their costs and demand for their products. This creates a feedback loop where the actions of one party influence the decisions of the other.

Question 6

Who or what is responsible for the allocation of scarce resources into the production of most goods in the U.S.?

Accepted Answer

In the United States, the allocation of scarce resources into the production of most goods is primarily done through the market mechanism, where prices serve as signals for producers and consumers to make decisions about what goods to produce and purchase. Through the interaction of supply and demand, prices adjust to allocate resources efficiently, with goods that are in higher demand being produced more and those in lower demand being produced less. While the government and Federal Reserve Bank may influence market forces through policies like taxation or interest rate changes, the market system is generally responsible for resource allocation. The UN does not have jurisdiction over the allocation of resources in the United States.

Question 7

The purpose of making assumptions in economic model building is to

Accepted Answer

The purpose of making assumptions in economic model building is to simplify the model while keeping important details. This allows economists to understand and analyze complex economic relationships in a manageable way. While assumptions may not always perfectly reflect real-world situations, they can provide valuable insights and predictions.

Question 8

Income tax on the wealthy to finance the welfare for the poor causes income redistribution.This is an example for the trade-off

Accepted Answer

The trade-off here is between income redistribution and economic efficiency. Implementing a high income tax on the wealthy to finance welfare programs for the poor may lead to income redistribution, but it can also discourage investment and innovation by the wealthy, leading to reduced economic growth. Therefore, the best choice would be to strike a balance between income redistribution and economic efficiency. This can be achieved by implementing a progressive tax system, where the wealthy pay a higher percentage of their income in taxes, but still incentivizing them to invest and innovate. Ultimately, the goal should be to create a society where everyone has equal opportunities to succeed and prosper.

Question 9

Microeconomics is often called

Accepted Answer

Microeconomics is often called price theory because it focuses on analyzing how individual consumers and producers make decisions about resource allocation and pricing within specific markets.

Question 10

Most modern financial centers use computers to match buyers and sellers.This absence of personal contact contradicts the definition of a market.

Accepted Answer

Buyers and sellers need not meet during a market transaction since a market is not tied to a particular location.

Question 11

The flu vaccination example in Section 1.1 of the textbook is an example of how policy makers may cope with

Accepted Answer

The flu vaccination example in Section 1.1 of the textbook is an example of how policy makers cope with the scarcity of medical treatment. The limited supply of vaccines creates scarcity, and policy makers must decide how to allocate those vaccines to maximize their effectiveness.

Question 12

Einstein was quoted saying "Everything should be made as simple as possible,but not simpler." When it comes to economic models this means that

Accepted Answer

Einstein's quote emphasizes the balance in creating models that are as simple as necessary but not overly simplified, which applies to economic models by suggesting they should not be too complex, not be too simple, and have an appropriate level of abstraction for the topic being investigated.

Question 13

Under most circumstances,the application of taxes on goods will only affect who gets the goods.

Accepted Answer

Taxes will affect which goods are produced,how goods are produced,and who gets the goods.

Question 14

A market

Accepted Answer

A market allows for interactions between consumers and firms, but it does not always involve a physical location (it can be online). While personal exchange of goods for money is common in markets, it is not a necessary requirement. Markets also have a significant influence on prices, as prices are determined by the supply and demand of goods and services.

Question 15

Economists tend to judge a model based upon

Accepted Answer

The accuracy of a model's predictions is crucial in order to use it for decision-making purposes. While the reality of assumptions and the simplicity or complexity of a model are also important considerations, ultimately the model must be able to provide accurate predictions in order to be useful.

Question 16

Microeconomics studies the allocation of

Accepted Answer

Microeconomics is the study of how individuals and firms make decisions regarding the allocation of scarce resources. It focuses on how these decisions affect the supply and demand of goods and services in the market. So, the best choice is B as it is the core aspect of microeconomics.

Question 17

In year 2008,1334 million lbs of milk was produced and sold in U.S.This is

Accepted Answer

The quantity of milk produced and sold in the US is determined by the interactions in the market, which includes the supply from producers and the demand from consumers. The US government may have some regulations and policies on milk production, but ultimately, the production and sale of milk is driven by market forces. Therefore, option B is the most appropriate answer.

Question 18

Society faces trade-offs because of

Accepted Answer

Society faces trade-offs because resources are limited (scarcity) and choices must be made about how to allocate those resources. This applies regardless of whether or not there are government regulations, greedy corporations, or faceless bureaucrats involved.

Question 19

If a model's predictions are correct,then

Accepted Answer

Just because a model's predictions are correct, it does not necessarily mean that its assumptions were correct. Additionally, while correct predictions may increase confidence in the model, it does not prove the model to be correct in all cases. There may be situations in which the model's predictions are correct but only by coincidence, or the model may be overfitting to the data. Therefore, choice D is the best answer.

Question 20

An automobile manufacturer is trying to make decisions about using more workers or more equipment.This belongs to the trade-off

Accepted Answer

The decision of whether to use more workers or more equipment falls under the trade-off of "how to produce". This involves weighing the cost and benefits of different production methods and determining the most efficient and effective way to produce goods or services. Depending on the specific circumstances and goals of the automobile manufacturer, either employing more workers or investing in more equipment may be the better choice. However, whichever choice is made will have an impact on the company's costs, productivity, and overall profitability.

Quiz 1: Introduction