In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals
A) always tend to act in an altruistic manner.
B) always consider the impact of their actions on the welfare of others.
C) are motivated by self-interest.
D) are generally not concerned with economic questions.
Ques. 2Explain why even the most affluent people, businesses and counties never solve the problem of scarcity.
What will be an ideal response?
Ques. 3Hospitals announce that there are not enough nurses available to keep them fully staffed. Economically speaking, what does this announcement mean?
A) The market wage for trained nurses is currently above the equilibrium wage.
B) There is currently a surplus of nurses in this market.
C) The market wage for nurses will eventually rise to the market clearing wage.
D) The market will adjust very rapidly to correct this imbalance because anyone can be a nurse without any training.
Ques. 4Suppose the tax rate on the first 10,000 income is 0 percent; 10 percent on the next 20,000; 20 percent on the next 20,000; 30 percent on the next 30,000; and 40 percent on any income over 80,000. Family A has income of 40,000.
What is the marginal and average tax rate for Family A? A) marginal10 percent; average10 percent
B) marginal20 percent; average10 percent
C) marginal25 percent; average20 percent
D) marginal20 percent; average25 percent
Ques. 5In the labor market, adjustments to changes in supply and demand
A) usually occur instantly.
B) usually take time to occur.
C) do not apply, since the labor market does not respond to supply and demand forces.
D) do not apply, since wages in the labor market always go up.
Ques. 6In its most ideal form, a price system allows
A) firms to act in such a way that they eliminate scarcity.
B) consumers to satisfy all their wants.
C) resources to move from lower-valued uses to higher-valued uses through voluntary exchange.
D) government policy makers to allocate resources to the uses which they consider to be in the best interests of society.
Ques. 7Distinguish between a command-and-control economic system and a price system.
What will be an ideal response?
Quick Reply
