Question 1

What are the three forces that control economic reality? Give an example of each.

Accepted Answer

The three forces are economic forces (the invisible hand),social and cultural forces,and political and legal forces.An example of an economic force is that,when there is an excess supply of some good,price tends to fall.Social and cultural forces include such things as churches,accepted norms or standards of behavior.Political and legal forces include such things as antitrust laws,and agricultural price supports.

Question 2

How are deduction,induction,and abduction related? Which approach was used by early economists? Which is used by modern economists?

Accepted Answer

Abduction is reasoning that involves both deduction and induction.Earlier economists used only deduction.Modern economists use abduction,because they have added induction to what has historically been a deductive science.

Question 3

What role does coercion play in an economy?

Accepted Answer

Coercion has historically been a part of all economies as they try to solve coordination problems.Specifically coercion involves limiting people's wants and desires and increasing the amount of work individuals are willing to do.

Question 4

Explain how the government might apply economic reasoning in deciding on which of many techniques it should employ to reduce or eliminate terrorist attacks on airlines.What problems can arise when using such an approach?

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Question 5

How are the three central economic questions-What,How,and For Whom-related to the concept of scarcity?

Accepted Answer

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Question 6

What are theorems? What are precepts? If two economists agree on a theorem,do they necessarily agree on precepts? If two economists agree on a precept,do they necessarily agree on theorems?

Accepted Answer

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Question 7

What does the term efficiency mean?

Accepted Answer

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Question 8

Explain how each of the following scenarios illustrates the interaction of economic forces,social and cultural forces,and political and legal forces.
(a)State officials are trying to move welfare recipients into jobs during a period of economic weakness,rising unemployment,and declining federal funding.
(b)The European Union is funding a massive program to explore ways of using hydrogen to replace fossil fuels both to increase energy availability and to protect the environment.
(c)In some states,many types of retail stores are prohibited from opening before noon on Sunday.
(d)In North Dakota,most colleges and universities are located in small towns.Despite shrinking student populations,state law mandates that all of these schools remain open.

Accepted Answer

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Question 9

What is opportunity cost? Give an example.

Accepted Answer

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Question 10

What is economic reasoning? Give an example.

Accepted Answer

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Question 11

What is economics,and what are the three coordination problems an economy must solve?

Accepted Answer

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Question 12

As newly elected President of your school's Economics Club,you must prepare the Club's annual budget of $5,000.Past budgets have included: 1)fees for guest speakers,2)tours of local businesses; 3)charges for downloading economic statistics; 4)an end-of-semester party,and 5)the Club President's salary.How would the central coordination problems faced by any economic system apply to your task of deciding how to allocate the $5,000?

Accepted Answer

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Question 13

What is scarcity? Why is it so difficult to eliminate it?

Accepted Answer

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Question 14

What is the economic decision rule?

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Question 15

Explain the differences between positive economics,normative economics,and the art of economics.Explain why you would categorize each of the following three statements as belonging to positive economics,normative economics,or the art of economics.
(a)The unemployment rate is 6.5 percent.
(b)The unemployment rate is unacceptably high.
(c)If the government wants to reduce the unemployment rate,it should try cutting taxes.

Accepted Answer

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Question 16

In the late 1970's,the U.S.mandated a maximum highway speed of 55 miles per hour to economize on fuel.Evidence showed that the lower 55-miles-per hour speed limit also significantly reduced traffic fatalities.Nevertheless,when the gas shortage eased,we have returned to the higher speed limits.Provide an economic rationale for not permanently lowering the speed limit to 55 miles per hour when we know that it will save lives.

Accepted Answer

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Question 17

What is the difference between economic forces and market forces?

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Question 18

In its earliest form,economics was primarily a deductive science closely related to philosophy.How does modern economics differ from this early form of economics? What has caused it to change? Is the field of economics better now because of these changes? Explain.

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Question 19

What is the "invisible hand",and how does it work as a market force?

Accepted Answer

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Question 20

Explain how microeconomics differs from macroeconomics.Explain why the following headlines,taken from various issues of The Wall Street Journal,deal with either microeconomics or macroeconomics.
(a)"Microsoft posted a 26% increase in sales"
(b)"Housing starts soared 13.3% in September"
(c)"Honeywell Plans to Slash More Jobs"
(d)"Germany to Breach Key Deficit Target it Helped to Create"
(e)"China's Output Grew 8.1%"
(f)"Washington Is Urging Canada to Increase Military Spending"

Accepted Answer

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Quiz 1: Economics and Economic Reasoning