CON 260 32. Which of the following statements does NOT apply to a market economy

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CON 260 32. Which of the following statements does NOT apply to a market economy? a. Firms decide whom to hire and what to produc b. Households decide which firms to work for and what to buy with their incomes. c. Prices act as a "visible hand" to direct economic activities in allocating scarce resources. d. Prices act as an "invisible hand" to direct economic activities in allocating scarce resources. 33. In economics, the cost of something is what you give up to get it. For instance, the adage, "There is no such thing as a free lunch, is used to illustrate the principle that people face tradeoffs and associated with opportunity costs. As you have experienced, coming to college is not a free lunch, what is the opportunity cost of going to college? a. the cost that the parents pay for their children to attend the college. b. the value of the best opportunity that a student gives up to attend college such as working. c. the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses d. zero, since a college education will allow a student to earn a larger income after graduation the participants in the economy are households and firms. In the circular-flow diagram, which of the following items flows from firms to households through the markets of factors ofp a. factors of production such as land, labor, or capital c. dollars spent on goods and services. roduction? b. dollars paid to land, labor, and capital d. goods and services. and observation is more difficult in economics than in sciences such as physics due to the difficulty in nt in an economic system is not easy to conduct. Thus, to refute their theories, economists often gather conductin g a c isodes of economic change. Which of these statements about cconomic models is NOT correct? economic models provide insights about the world . b. Economic models are built without assumptions. a. Fo c. Economic models are often composed of equations and diagrams r economists, d. All of the above are correct. ist evaluates a positive statement, he or she is primarily examining evidence. Thus, which of the following is an of money grows rapidly, inflation is a predictable consequence. an economi 36. When example of a positive, as opposed to normative, statement? a. When the quantity b. Income tax c. The quantity of money has grown too slowly in recent years. d. All of the above are positive statements. rates should not have been cut as they were a few years ago 37. Suppose the United States has a comparative advantage over Mexico in producing cars. The principle of comparative advantage asserts that United States should produce a moderate quantity of cars and import the remainder of what it requires from Mexico. b. the United States should refrain altogether from producing cars and import all of what it requires from Mexico nited States should produce more cars than what it requires and export some of it to Mexico ico has nothing to gain from importing United States cars Table#1

Explanation / Answer

Ans)
32.
c. Prices act as a "visible hand" to direct economic activities in directing scarce resources.
In a market economy the prices are the invisible hand which direct the society to its wellbeing.
33.
b. the value of the best opportunity that a student gives up to attend college such as working.
An opportunity cost is the value of the next best alternative that is given up in order to pursue the current choice.
34.
b. dollars paid to land, labor, and capital.
In the market for factors of production, the households get paid by the firm for their land, labor or capital.
35.
b. Economic models are built without assumptions.
Economic models are always based on assumptions.

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