1. According to proponents of capitalism, self-interest: is always wrong since i
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Question
1. According to proponents of capitalism, self-interest:
is always wrong since it is the same thing as selfishness.
is morally permissible as long as it stays within the bounds of property rights and voluntary agreements.
is always morally permissible since everyone has the right to do anything they please.
is a moral failing of human nature and could be easily stamped out of society if we removed private property.
2.
Governor Smith of Georgia is presented with the following data: currently the state derives a total of $400 million of benefits from education spending and it only costs $250 million. The legislature proposes increasing spending to $300 million. Quality studies show that this new spending will increase the total benefit of education to $425 million. Choose the correct relevant answer below.
Since the new total benefit of $425 million is so much larger than the new total cost of $350 million, it clearly makes economic sense to spend the extra money according to the Cost-Benefit Principle.
To get the economically wise decision made according to the Cost-Benefit Principle, we need to compare the marginal benefit of $25 million with the total cost of $350 million. This new spending makes no economic sense.
In order to use the Cost-Benefit Principle correctly we need to compare the marginal benefit of the new spending, which is $25 million, with the marginal cost of the new spending, which is $50 million. This new spending makes no economic sense.
Education spending by the state clearly makes no sense under any circumstances according to the Cost-Benefit Principle. As we can see from the data above, there is no amount of spending where the total benefits exceed the total costs.
3.
Senator Smith argues that the U.S. should spend another $100 million on healthcare this year in addition to the $800 million that we are currently spending. Senator Jones argues that we should not. Which of the following related statements is correct?
The extra $100 million spent on health care will not provide as much benefit as the previous $100 million due to diminishing marginal benefit.
The extra $100 million spent on health care will necessarily provide no extra benefit due to the problem of diminishing marginal benefit.
The extra $100 million spent on health care will decrease the total benefit derived from health care but will increase the marginal benefit.
Senator Smith must be a better person than Senator Jones since there can be no rational reason to oppose more health care spending.
4.
If an economy is operating inside its production possibilities frontier:
it is producing efficiently. The economy cannot produce more of one good without simultaneously reducing the output of another good.
is producing inefficiently. If production was arranged more efficiently the economy can produce more on one good without sacrificing any production of another good.
it is producing at an unattainable point. You cannot be inside the Production Possibilities Frontier.
then opportunity cost approaches infinity. No economy want that to happen.
5.
The circular flow diagram:
illustrates that it is only the capitalist owners of firms who benefit since they absorb the resources owned by household without doing anything in return.
illustrates that both households and firms benefit each other by providing something of value that the other lacks.
illustrates how resources flow from the firm to the households who provide finished goods to the firms.
shows the maximum amount of any two goods that can be produced with a given set of resources.
6.
when considering the factors of production:
oil is the most important one, much more so than land.
only land is not created by human beings. Both physical capital and labor come from human effort.
labor receives the least amount of payment as a percentage of the economy. Both land and capital receive much more.
we see that the government owns most of them in capitalist oriented countries.
7. One way of measuring how socialist or capitalist a country leans is to:
measure how much the government spends as a percentage of the economy. If the government spends very little we can assume that it leans capitalist.
measure how much the government spends as a percentage of the economy. If the government spends very little we can assume that it leans socialist.
measure how much it protects private property rights. If the government protects them with vigor we can assume it leans strongly socialist.
the question is mistaken. There is no rational way to rank nations on how capitalist or socialist it is. It is all personal opinion.
A)is always wrong since it is the same thing as selfishness.
B)is morally permissible as long as it stays within the bounds of property rights and voluntary agreements.
C)is always morally permissible since everyone has the right to do anything they please.
D)is a moral failing of human nature and could be easily stamped out of society if we removed private property.
Explanation / Answer
1)
Capitalism believes in self interest and assumes that every human has fellow feelings. Hence, they tend to move in direction of overall upliftment of society. but human actions must be within some limits.
Right answer is : (B)
2)
Marginal cost of providing education = $ 50 Million
Marginal benefit = $ 25
Marginal cost is larger than marginal benefit. Hence, it does not make economic sense to make spending.
right answer is (c)
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