ch 1 econ way of thinking

ch 1 econ way of thinking - The Economic Way of Thinking 1

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CHAPTER 1 The Economic Way of Thinking The Economic Way of Thinking 1 A. MULTIPLE-CHOICE QUESTIONS ON THE PRINCIPAL IDEAS OF CHAPTER 1 1. Economic theory began with efforts to understand why it was that many diverse individuals, pursuing their own interests on the basis of extremely limited information, A. cooperated more effectively when they were selfish than when they tried to behave generously. B. could not coexist peacefully in the absence of an independent government to arbitrate their disputes. C. managed to cooperate extensively in mutually beneficial ways. D. preferred continued social chaos to an ordered, planned society. 2. The system of plan coordination described by economic theory is one in which A. consumers are supreme. B. producers control both output and prices. C. producers decide what kinds of goods will be available, and consumers decide how much ought to be produced. D. people adjust to one another’s actions by responding to the changing relative advantages that they perceive in the various opportunities open to them. 3. Which one of the statements below best summarizes the economic way of thinking about social behavior? Social behavior A. can be predicted from knowledge of the biological, cultural, and psychological factors that determine it. B. is determined by the interactions of the three major groups in society: consumers, business, and government. C. is the outcome of the incentives created by the “rules of the game”. D. is determined by a continuous battle for domination between the wage-earning class and the class made up of large property holders.
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2 Chapter 1 4. The use of theory to explain or predict the coordination of an economic system A. enables students of economics to avoid the biases that might otherwise distort their thinking. B. will lead to wrong results unless the theory is based entirely upon close observation. C. leads to many conclusions that are correct in theory but false in the real world. D. is unavoidable because all efforts at understanding are rooted in some theoretical framework. B. ANSWERS TO AND EXPLANATIONS OF MULTIPLE-CHOICE QUESTIONS ON THE PRINCIPAL IDEAS OF CHAPTER 1 1. C. Economic theory, in assuming that people pursue their own interests, doesn’t assume that those interests are necessarily selfish or materialistic. Nor do people as a rule cooperate more effectively when they’re selfish than when they’re generous. But economic theory does show how a great deal of effective cooperation can occur in the presence of very little generosity and also without a great deal of government guidance and control. It explains the surprising fact that order and not social chaos is found in the absence of an authoritative, national economic plan. 2.
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This note was uploaded on 01/21/2010 for the course EC ec101 taught by Professor Prychitko during the Winter '10 term at N. Michigan.

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ch 1 econ way of thinking - The Economic Way of Thinking 1

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