Question 14. 14. The decisions of firms and households are guided by prices and

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Question 14. 14. The decisions of firms and households are guided by prices and self-interest in a (Points : 5) command economy. centrally-planned economy. market economy. All of the above are correct. Question 15. 15. Which of the following is not an example of the opportunity cost of going to school? (Points : 5) The money a student could have earned by working if he had not gone to college. The nap a student could have enjoyed if he had not attended class. The party a student could have enjoyed if he had not stayed in to study for his exam. The money a student spends on rent for his apartment while attending school. Question 16. 16. Communist countries worked under the premise that (Points : 5) markets were the best way to organize economic activity. central planners were in the best position to determine the allocation of scarce resources in the economy. households and firms, guided by an “invisible hand,” could achieve the most efficient allocation of scarce resources. allowing the market forces of supply and demand to operate with no government intervention would achieve the most efficient allocation of scarce resources. Question 17. 17. Which of the following transactions does not take place in the markets for the factors of production in the cir-cular-flow diagram? (Points : 5) Jason provides plumbing services for a plumbing company and receives an hourly wage from the company for his services. Jennifer works as a marriage counselor and her clients pay her on a per-hour basis for her services. Brody owns several shopping malls and receives rent payments from the companies that operate those malls. Bree sells advertising for a newspaper and receives a commission from the newspaper company for each advertisement that she sells. Question 18. 18. Figure 2-5 Refer to Figure 2-5. The opportunity cost of this economy moving from point D to point B is (Points : 5) zero. 50 soccer balls. 60 sweaters. 50 soccer balls and 60 sweaters. Question 19. 19. Figure 2-3 Refer to Figure 2-3. This economy has the ability to produce at which point(s)? (Points : 5) J, K, M, N K, M, N M Question 20. 20. While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms’ owners, workers, and customers. This statement illustrates the principle that (Points : 5) trade can make everyone better off. rational people think at the margin. people face tradeoffs. people respond to incentives.

Explanation / Answer

14. All of the above are correct.

15. The money a student spends on rent for his apartment while attending school.

16. central planners were in the best position to determine the allocation of scarce resources in the economy.

17. Jennifer works as a marriage counselor and her clients pay her on a per-hour basis for her services.

20. people face tradeoffs because benefit to society leads to cost of workers, owners and customers.

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