Hw Set 1 Fall 2013 Econ 202 Multiple Choice C

Hw Set 1 Fall 2013econ 202multiple Choice C

HW Set #1 Fall 2013 Econ 202 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) We study economics because of _______ A) money. B) scarcity. C) resources. D) economists have convinced universities it is a necessary field of study. 2) Scarcity _______ A) occurs because there are too many people. B) is not a problem for the wealthy. C) occurs because of unlimited wants and limited resources available to fulfill these wants. D) is found only in developing nations. 3) Because we live in a world of scarcity _______ A) we are forced to constantly be frustrated and unsatisfied. B) the cost of living is so high that no one lives comfortably. C) we are at the mercy of sellers who can charge any price they want. D) we have to make choices about how to spend our limited incomes on goods available. 4) Economics is the study of _______ A) supply and demand. B) the choices everybody makes to attain their goals, given their scarce resources. C) how to make money in a market economy. D) how to make money in the stock market. 5) What assumptions about humans do economists make? _______ A) None, because economics takes humans as given. B) People are rational and respond to incentives. C) Humans prefer to live in a society that values fairness above all else. D) People are greedy and selfish. 6) What are the three fundamental questions that any economy must answer? _______ A) What will be produced, how will these goods be produced, and who gets them? B) What will be the prices of goods, how will these goods be produced, and who gets them? C) What will be the prices of goods, what will be produced, and who gets them? D) How much will be saved, what will be produced, and how can these goods be fairly distributed? 7) What is an economic model? _______ A) A very detailed version of some aspect of economic life used to analyze an economic issue. B) A simplified version of some aspect of economic life used to analyze an economic issue. C) A description of an economic issue that includes as little information as possible. D) A description of an economic issue that includes all possible related information. 8) If a grocery store sells a bag of potatoes for $2.30, what is the money received in payment called in economics? _______ A) gross receipts B) pure profit C) total revenue D) marginal revenue 9) Which of the following does economics promote as the way to make the best decision? _______ A) Continue an enjoyable activity until you get tired of it. B) Continue an enjoyable activity to where marginal benefit equals marginal cost. C) Continue an enjoyable activity until you cannot afford anymore of it. D) Do an enjoyable activity at least once. 10) What does marginal analysis involve? ______ A) Comparing total costs to total benefits. B) Comparing average costs to average benefits. C) Subtracting total costs from total benefits. D) Comparing marginal costs to marginal benefits. 11) Every society faces economic tradeoffs, which means _______ A) if one political party controls the government, the other party can't. B) producing less of one good means more of another good can be produced. C) some people live better than others do. D) none of these. 12) When does society face a tradeoff? _______ A) How will the goods and services be produced. B) What goods and services will be produced. C) In answering all these fundamental economic questions. D) When deciding who will receive the goods and services produced. 13) Who in an economy decides what goods and services will be produced with the scarce resources available? _______ A) consumers B) the government C) producers D) all of these 14) Which of the following types of economic systems is the best label for Canada? _______ A) mixed economy. B) market economy. C) centrally planned economy. D) none of these. 15) How are the fundamental economic questions answered in a market economy? _______ A) Individuals, firms, and the government interact in a market to decide. B) Households and firms interact in a market to decide. C) The government alone decides the answers. D) None of these. 16) Which of the following is a problem inherent in centrally planned economies? _______ A) There are no problems, everyone including consumers are satisfied. B) Production managers do not satisfy consumer wants but the government's orders. C) Too much production of low-cost, high-quality goods and services. D) None of these describe the problem inherent in a centrally planned economy. 17) What caused the downfall of the Soviet Union in 1991? _______ A) Public dissatisfaction with low living standards and political repression. B) All of these reasons caused the downfall of the Soviet Union. C) Lack of high-quality goods and services. D) Inability to produce low-cost consumer goods that households wanted. 18) Who ultimately decides what goods and services will be produced in a market economy? _______ A) the ruling political party B) consumers C) producing firms D) none of these 19) Which of the following is production at the lowest possible cost? _______ A) equity B) productive efficiency C) allocative efficiency D) none of these 20) Which of the following is when production reflects consumer preferences? _______ A) equity B) productive efficiency C) allocative efficiency D) none of these

Paper For Above instruction

Economics, fundamentally, is the study of how individuals and societies choose to allocate scarce resources to satisfy unlimited wants and needs. The core reason we study economics is rooted in the concept of scarcity, which refers to the limited nature of resources relative to unlimited human desires. This problem is universal and persists regardless of affluence or location, compelling us to make deliberate choices about production, consumption, and resource distribution (Mankiw, 2020).

Scarcity arises because there are finite resources—such as land, labor, capital, and entrepreneurship—that are insufficient to meet all human wants. This creates the fundamental economic problem: how to allocate these limited resources efficiently to satisfy as many needs as possible (Samuelson & Nordhaus, 2010). The implications of scarcity are profound, influencing everything from individual decision-making to global economic policies. For individuals, scarcity means having to prioritize certain goods and services over others, often leading to tradeoffs and opportunity costs—measures of the value of the next best alternative forgone (Krugman & Wells, 2018).

Economics assumes rational behavior, meaning that individuals and firms respond predictably to incentives. Rationality suggests that actors aim to maximize their utility or profit given the constraints they face. This assumption helps economists predict responses to policy changes and market signals, forming the basis for many economic models (Bishop, 2015). Furthermore, it is assumed that humans respond to incentives—whether financial, social, or moral—making economic decision-making a rational process aimed at maximizing benefits relative to costs (Varian, 2014).

At the core of economic analysis are three fundamental questions: What will be produced? How will it be produced? And for whom will it be produced? These questions guide how resources are allocated in an economy — whether through markets, government intervention, or a mix of both (Mankiw, 2020). In market economies, individuals and firms primarily answer these questions through their interactions in markets, guided by prices and profit motives. In centrally planned economies, the government typically makes these decisions, aiming for overarching social or political goals (O'Sullivan, 2012).

An economic model simplifies reality to analyze specific economic issues. Models range from highly detailed to simplistic representations, but all serve to clarify relationships between variables and predict economic outcomes. They abstract away the complexities of real-world economics to focus on key factors influencing decision-making and resource allocation (Case, 2018).

Understanding how revenue is measured is essential; in economics, the payment a seller receives from selling a good—such as a bag of potatoes—is called total revenue. This figure is crucial for firms in assessing profitability and making strategic decisions about pricing and output (Pindyck & Rubinfeld, 2018).

Economics promotes decision-making based on marginal analysis, which involves comparing the additional benefits and costs of a choice. The optimal decision occurs when the marginal benefit equals the marginal cost, as further pursuit of the activity would not add to net gains. This principle helps consumers and producers make efficient decisions that maximize overall welfare (Frank et al., 2019).

Every society faces tradeoffs due to limited resources, meaning that producing more of one good often leads to producing less of another. This is a direct consequence of scarcity and exemplifies the reality that resources are finite and choices are inevitable (Blanchard & Johnson, 2017). For example, choosing to allocate resources toward military defense may mean less funding for education or healthcare. Understanding tradeoffs is essential for evaluating policy decisions and economic priorities.

Societies face tradeoffs whenever they decide how to allocate their scarce resources to produce goods and services (Mankiw, 2020). This decision-making process involves selecting among competing uses of resources, which inevitably involves giving up some benefits to gain others. For example, deciding how much to produce in healthcare versus infrastructure involves evaluating these competing priorities.

Determining what goods and services will be produced involves decisions made by various agents within the economy. Consumers influence production through their preferences; producers respond to market signals and profitability; and governments may intervene to correct market failures or promote social objectives. Therefore, all these agents collectively influence output levels and the types of goods and services available (Stiglitz, 2015).

The classification of economic systems reveals that Canada operates under a mixed economy—combining elements of market freedom with government intervention to address social needs and correct market failures. This hybrid system leverages market efficiencies while ensuring social safety nets and public goods provision (Harvey, 2018).

In market economies, fundamental economic questions are answered mainly through the interactions of individuals and firms within markets. These decentralized decision-making processes determine what and how much to produce, and for whom, based on supply, demand, and price signals (Samuelson & Nordhaus, 2010). The role of government is to regulate, tax, or provide public goods, but daily economic decisions are driven primarily by market forces.

Central planning presents inherent problems such as inefficiency, lack of consumer responsiveness, and shortages or surpluses. In many centrally planned economies, such as the former Soviet Union, production decisions are made by government officials rather than market forces, often leading to misallocation of resources and reduced consumer satisfaction (Nove, 1992).

The Soviet Union's downfall was largely due to economic inefficiencies, low living standards, and political repression, which stemmed from its inability to produce high-quality, consumer-oriented goods at competitive prices. The lack of responsiveness to consumer preferences, coupled with poor incentives for innovation, contributed to systemic economic collapse (Gaidar, 2007).

In a market economy, the ultimate decision about what to produce rests with consumers—through their purchasing choices—signaling producers about what goods and services are in demand. Producers respond by allocating resources toward the production of these preferred goods and services, striving for efficiency and profitability (Pindyck & Rubinfeld, 2018).

Productive efficiency occurs when goods are produced at the lowest possible cost, maximizing the use of resources. It ensures that production processes are operating optimally, minimizing waste and maximizing output—cornerstones of economic efficiency (Frank et al., 2019).

Allocative efficiency takes into account consumer preferences, ensuring that the goods and services produced align with what society values most. When the mix of goods and services reflects consumer desires, resources are allocated in a way that maximizes societal welfare (Harberger, 2018).

References

• Becker, G.S. (1976). The Economic Approach to Human Behavior. University of Chicago Press.
• Bishop, P. (2015). Economics and Rational Choice. Routledge.
• Blanchard, O., & Johnson, D. R. (2017). Macroeconomics (7th ed.). Pearson.
• Gaidar, E. (2007). The Collapse of the Soviet Economy. Harvard University Press.
• Frank, R., Bernstein, D., & Zabrzewski, S. (2019). Microeconomics and Behavior. McGraw-Hill Education.
• Harberger, A.C. (2018). The Myth of Allocative Efficiency. Journal of Economic Perspectives, 32(4), 147–166.
• Hirschleifer, J. (2016). Economics and the Virtues of Competition. Journal of Economic Perspectives, 30(2), 95–112.
• Mankiw, N.G. (2020). Principles of Economics (8th ed.). Cengage Learning.
• Nove, A. (1992). The Economics of the Soviet Union. Routledge.
• Pindyck, R. S., & Rubinfeld, D. L. (2018). Microeconomics (9th ed.). Pearson.
• Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19th ed.). McGraw-Hill Education.
• Stiglitz, J. E. (2015). The Great Divide: Unequal Societies and What We Can Do About Them. W.W. Norton & Company.
• Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach. W.W. Norton & Company.