Econ_11_Prac_Exam_1_Ans - Practice Exam 1 Answers Name Econ...

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Practice Exam 1 Answers 1 Name _______________________ Econ 11 Microeconomics Practice Exam 1 Answers I-1 1. The study of economics is primarily concerned with: a. keeping private businesses from losing money. b. demonstrating that capitalistic economies are superior to socialistic economies. c. determining the most equitable distribution of society’s output. *d. choices that are made in seeking to use scarce resources efficiently. (a) is a concern of management, not economics. (b) is part of comparative economics. (c) is part of normative economics. (d) is correct. This is a central concern of economics. I-2 2. Why do economists assume that people are selfish? a. It fits the experience of the real world. b. It is simpler to model this than to include terms for other peoples’ happiness. c. It fits the behavior of firms, which do the bulk of economic activity. d. all of the above *e. The premise of the problem is false. Economists do not assume that people are purely selfish. Economists assume that people do care about their own happiness. But in addition they assume that people also care about the happiness of family, friends, strangers and even enemies.
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Practice Exam 1 Answers 2 I-3 3. Barack says that “The imposition of a tax on beer will raise its price.” Hillary argues that “Taxes should be imposed on beer because college students drink too much.” We can conclude that: *b. Hillary’s statement is normative, but Barack’s is positive. Positive statements are concerned with what will happen if a change is introduced. Normative statements are concerned with what should be done to achieve certain goals. A red-flag word identifying normative statements is a word like "should." Hillary's statement is normative, implying a goal, sobriety or responsible drinking. Barack's statement asserts a consequence stemming from a change, but does not argue for or against the change. Barack's statement is positive. III-1 4. Excluding corner solutions, in consumer equilibrium, which of the following is true? budget constraint. *d. All of the above are true. The marginal rate of substitution is the slope of the indifference curve. It will be equal to the slope of the budget constraint, so (a) is true. (b) is also true. The optimal bundle will be at the point where the indifference curve and the budget constraint are tangent. (c) is also true. (d) is correct.
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