Because Economic Generalizations Are Simplifications From Re

Posted on December 26, 2025

Because Economic Generalizations Are Simplifications From Reality

Because economic generalizations are simplifications from reality, they are impractical and useless. A. True B. False 2: Normative statements are expressions of facts. A. True B. False 3: Marginal analysis means that decision-makers compare the extra benefits with the extra costs of a specific choice. A. True B. False 4: The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment. A. True B. False 5: The present choice of position on the production possibilities curve will not influence the future location of the curve. A. True B. False 6: The lower the consumer's income, the higher his or her budget line. A. True B. False 7: The guiding function of prices tends to keep resources flowing toward their most highly valued uses. A. True B. False 8: Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P = MC output. A. True B. False 9: Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers. A. True B. False 10: Price discrimination is illegal in the United States under antitrust regulations. A. True B. False 11: Refer to the above diagram for a nondiscriminating monopolist. The profit-maximizing output for this firm is M. A. True B. False 12: Refer to the above diagram for a nondiscriminating monopolist. If the government regulates the monopolist so that it charges the socially optimal price, the monopolist will produce output Q. A. True B. False 13: Refer to the above diagram for a nondiscriminating monopolist. At output M total cost will be 0CHM. A. True B. False 14: Refer to the above diagram for a nondiscriminating monopolist. At the profit-maximizing output the firm's economic profit will be BAFG. A. True B. False 15: In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it. A. True B. False 16: The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist. A. True B. False 17: If three or four homogeneous oligopolists collude, the resulting price and production outcomes will be similar to those of pure monopoly. A. True B. False 18: All other things equal, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude. A. True B. False 19: Collusion among firms always involves formal agreements. A. True B. False 20: As it relates to oligopoly, game theory focuses on the strategic behavior of rival firms. A. True B. False 21: Homogenous oligopolists tend to advertise more than do differentiated oligopolists. A. True B. False 22: It will be profitable for a firm to hire additional units of any resource up to the point at which its MRP is equal to its MRC. A. True B. False 23: The time-value of money refers to the idea that a given amount of money is more valuable to a person the sooner it is received. A. True B. False 24: Human capital investment refers to spending on education and worker training. A. True B. False 25: A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal. A. True B. False 26: Other things equal, the shorter the loan period and the larger the loan size, the higher is the interest rate charged by the lender. A. True B. False 27: The basic function of profits and losses is to allocate society's scarce resources to their highest valued uses. A. True B. False 28: Thomas Malthus argued that increases in living standards tend to reduce birthrates. A. True B. False 29: About one-half of U.S. electricity is generated using petroleum. A. True B. False 30: Electricity generating plants with low fixed costs tend to have high operating costs. A. True B. False 31: In electricity generation, it is most economically efficient to use a single energy source. A. True B. False 32: Energy demand is relatively stable over the course of a day. A. True B. False 33: Commodity prices are relatively stable from year to year. A. True B. False 34: A highly progressive tax takes relatively more from the rich than it does from the poor. A. True B. False 35: A progressive tax takes relatively more from the rich than it does from the poor. A. True B. False 36: The basic source of state government's revenue is the property tax. A. True B. False 37: The major expenditure of local governments is for education. A. True B. False 38: Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase. A. True B. False 39: Sales taxes on consumer goods are regressive because poor people consume a larger proportion of their incomes than do rich people. A. True B. False 40: A highly progressive tax takes relatively more from the rich than it does from the poor. A. True B. False 41: Although state and local taxes are highly progressive, Federal taxation is predominantly regressive. A. True B. False 42: The moral hazard problem is the tendency of some parties to a contract to alter their behavior as a result of the contract in ways which are costly to the other party. A. True B. False 43: Professor Gullible agreed to cancel the final examination if students promised to study for it anyway. The concept of moral hazard would predict that it is unlikely that students will study for the exam. A. True B. False 44: Insurance co-pays and deductibles are methods used by insurance companies to reduce moral hazard. A. True B. False 45: A free rider problem is where a hitchhiker on the side of the road, jumps in a vehicle whose driver allows him to drive, without paying any money for his trip. A. True B. False 46: The real free rider problem is more about a homeless person who rides his bike on the highway in which he didn’t pay taxes towards the upkeep. A. True B. False 47: In drawing a particular budget line, money income and the prices of the two products are fixed. A. True B. False 48: Firms in a monopolistically competitive industry have no reason to engage in non-price competition because their products are uniquely different from other sellers in the market. A. True B. False 49: Professor Homer Simpson likes to chew tobacco to relax as he drives home from the university after a hard day teaching ECON 2 students, knowing that his wife detests this habit including the mess he gets all over their car. According to economists, Homer is an irrational consumer. A. True B. False 50: In China, duck eggs are preferred to chicken eggs by its residents, this suggests to these Chinese residents, that Duck eggs are a normal goods; likewise chicken eggs are an inferior goods. A. True B. False