Introduction To Economics Questions!

1. The underlying reason that there are unattainable points on a production possibilities frontier diagram is that there:

Is government

Are always choices that have to be made

Is a scarcity of resources within a fixed level of technology

Is unemployment of resources

The correct answer is that there is a scarcity of resources within a fixed level of technology. This means that there are limited resources available to produce goods and services, and these resources cannot be infinitely expanded. Therefore, there will always be a limit to the production possibilities, resulting in unattainable points on the production possibilities frontier diagram.

Explanation

The correct answer is that there is a scarcity of resources within a fixed level of technology. This means that there are limited resources available to produce goods and services, and these resources cannot be infinitely expanded. Therefore, there will always be a limit to the production possibilities, resulting in unattainable points on the production possibilities frontier diagram.

2. The optimization assumption suggests that people make:

Irrational decisions

Unpredictable decisions

Decisions to make themselves as well off as possible

Decisions without thinking very hard

The optimization assumption suggests that people make decisions to make themselves as well off as possible. This means that individuals are rational and will choose the option that maximizes their own benefits or utility. It assumes that people carefully consider the available alternatives and weigh the costs and benefits before making a decision. This assumption is commonly used in economics and decision-making models to understand and predict human behavior.

Explanation

The optimization assumption suggests that people make decisions to make themselves as well off as possible. This means that individuals are rational and will choose the option that maximizes their own benefits or utility. It assumes that people carefully consider the available alternatives and weigh the costs and benefits before making a decision. This assumption is commonly used in economics and decision-making models to understand and predict human behavior.

3. The underlying reason production possibilities frontiers are likely to be bowed out (rather that linear) is:

Choices have consequences

There are always opportunity costs

Some resources and people can be better used producing one good rather than another

There is always some level of unemployment

The correct answer is "some resources and people can be better used producing one good rather than another". This is because production possibilities frontiers represent the maximum output combinations of two goods that an economy can achieve given its resources and technology. The bowed-out shape of the frontier indicates that resources are not equally efficient in producing different goods. Some resources may be better suited for producing one good, while others may be better suited for producing another. This reflects the concept of comparative advantage, where resources are allocated to their most productive uses.

Explanation

The correct answer is "some resources and people can be better used producing one good rather than another". This is because production possibilities frontiers represent the maximum output combinations of two goods that an economy can achieve given its resources and technology. The bowed-out shape of the frontier indicates that resources are not equally efficient in producing different goods. Some resources may be better suited for producing one good, while others may be better suited for producing another. This reflects the concept of comparative advantage, where resources are allocated to their most productive uses.

4. Scarcity implies that the allocation scheme chosen by society can:

Not make more of any one good

Always make more of any good

Typically make more of a good but at the expense of making less of another

Always make more of all goods simultaneously

Scarcity refers to the limited availability of resources in relation to unlimited wants and needs. The given answer suggests that the allocation scheme chosen by society can typically increase the production of a specific good, but this comes at the cost of producing less of another good. This implies that resources are finite and cannot be used to produce an unlimited amount of goods simultaneously. Therefore, the society needs to make choices and trade-offs when allocating resources to different goods based on their priorities and needs.

Explanation

Scarcity refers to the limited availability of resources in relation to unlimited wants and needs. The given answer suggests that the allocation scheme chosen by society can typically increase the production of a specific good, but this comes at the cost of producing less of another good. This implies that resources are finite and cannot be used to produce an unlimited amount of goods simultaneously. Therefore, the society needs to make choices and trade-offs when allocating resources to different goods based on their priorities and needs.

5. A production possibilities frontier is a simple model of:

Scarcity and allocation

Prices and output

Production and costs

Inputs and outputs

A production possibilities frontier is a simple model that represents the concept of scarcity and allocation. It demonstrates the limited resources available to produce goods and services, and the need to allocate these resources efficiently to meet society's needs and wants. The production possibilities frontier shows the different combinations of goods and services that can be produced given the available resources and technology, and helps in understanding the trade-offs and opportunity costs involved in production decisions.

Explanation

A production possibilities frontier is a simple model that represents the concept of scarcity and allocation. It demonstrates the limited resources available to produce goods and services, and the need to allocate these resources efficiently to meet society's needs and wants. The production possibilities frontier shows the different combinations of goods and services that can be produced given the available resources and technology, and helps in understanding the trade-offs and opportunity costs involved in production decisions.

6. Of course, all individual students are better off if they get better grades. If you were to conclude that all students would be better off if everyone received a "A" you would:

Have fallen victim to the fallacy of scarcity

Be right

Have fallen victim to the fallacy of composition

Be mistaking correlation with causation

If you were to conclude that all students would be better off if everyone received an "A," you would have fallen victim to the fallacy of composition. This fallacy occurs when someone assumes that what is true for the parts is also true for the whole. In this case, while it may be true that individual students benefit from better grades, it does not necessarily mean that everyone receiving an "A" would be beneficial for all students as a whole. This assumption overlooks the potential negative consequences, such as grade inflation or decreased motivation for students to excel.

Explanation

If you were to conclude that all students would be better off if everyone received an "A," you would have fallen victim to the fallacy of composition. This fallacy occurs when someone assumes that what is true for the parts is also true for the whole. In this case, while it may be true that individual students benefit from better grades, it does not necessarily mean that everyone receiving an "A" would be beneficial for all students as a whole. This assumption overlooks the potential negative consequences, such as grade inflation or decreased motivation for students to excel.

7. If you were to conclude, after carefully examining data and using proper evaluation techniques, that a tax credit for attending college benefits the poor more than a tax deduction (of equal total cost to the government) would, you would have engaged in ___ analysis to reach that conclusion.

Negative

Positive

Normative

Creative

The correct answer is positive. This is because the question is asking about the type of analysis used to reach the conclusion that a tax credit for attending college benefits the poor more than a tax deduction. Positive analysis is based on facts and data, and involves examining the actual effects and outcomes of a policy or decision. In this case, the conclusion is reached by carefully examining data and using proper evaluation techniques, which aligns with the characteristics of positive analysis.

Explanation

The correct answer is positive. This is because the question is asking about the type of analysis used to reach the conclusion that a tax credit for attending college benefits the poor more than a tax deduction. Positive analysis is based on facts and data, and involves examining the actual effects and outcomes of a policy or decision. In this case, the conclusion is reached by carefully examining data and using proper evaluation techniques, which aligns with the characteristics of positive analysis.

8. Imagine an economist ordering pizza by the slice. WHen deciding how many slices to oder she would pick that number where the enjoyable of the ___equals the enjoyment she could get from using the money on another good.

First slice

Last slice

Average slice

Total number of slices

The economist would pick the last slice of pizza because it represents the point where the enjoyment of consuming one more slice equals the enjoyment she could get from using the money on another good. This implies that she has reached the maximum level of satisfaction from consuming pizza and any additional slice would not provide as much enjoyment as using the money for another good.

Explanation

The economist would pick the last slice of pizza because it represents the point where the enjoyment of consuming one more slice equals the enjoyment she could get from using the money on another good. This implies that she has reached the maximum level of satisfaction from consuming pizza and any additional slice would not provide as much enjoyment as using the money for another good.