In economics, the concept that individuals are motivated by self-interest and respond predictably to opportunities for gain is known as
A) rational self-interest.
B) altruism.
C) sufficiency.
D) empiricism.
Ques. 2Economics deals with human needs. Do you agree or disagree? Why?
What will be an ideal response?
Ques. 3In deriving the demand schedule for a good, economists assume that
A) consumers have equal incomes to allocate among goods.
B) a consumer will allocate all of her income to one good.
C) all other influences on demand except the product price are held constant.
D) reported income changes at each point on the demand schedule.
Ques. 4An example of a regressive tax is the
A) corporate income tax.
B) personal income tax.
C) Social Security tax.
D) state inheritance tax.
Ques. 5When the text refers to rational self-interest, it means
A) your looking out for what is best for you as an individual.
B) your focus on your own contributions to society.
C) behavior that makes society better off.
D) behavior that helps your employer earn higher profits.
Ques. 6All of the following illustrate how government can correct for positive externalities EXCEPT
A) subsidies.
B) regulation.
C) government financing and production.
D) charging effluent fees.
Ques. 7An externality can best be defined as
A) a party not directly involved in a transaction.
B) a consequence of a transaction that spills over to affect third parties.
C) a right of an owner to use and exchange property.
D) a cost associated with the production of one more unit of output.
Ques. 8Assume a family that earns 20,000 pays 2,000 in income taxes, while a family that earns 40,000 pays 3,500 in income taxes. In this situation, the income tax system is
A) progressive.
B) regressive.
C) proportional.
D) one of the above but we cannot tell which one without more information.
Ques. 9When the price of a good falls, there will be
A) an outward shift in the good's demand curve.
B) both an outward shift in the good's demand curve and a movement along the good's demand curve.
C) a movement along the good's demand curve.
D) no change in quantity demanded.
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