2. Wheelan/The Power of Markets: Topic Quiz

Economics starts with one very important assumption: a. Individuals act to make themselves as well off as possible. b. Maximizing utility is synonymous with acting selfishly. c. Individuals share the same preferences. d. It is good economics to impose our preferences on individuals whose lives are much different than our own.

a. Individuals act to make themselves as well off as possible.

The market economy a. is a powerful force for making our lives better. b. penalizes scarcity, which has no inherent relation to value. c. provides goods that we need,

a. is a powerful force for making our lives better.

Price discrimination a. is the practice of selling different items at the same price to different people b. is the practice of selling the same item to different people at different prices c. is the practice of selling the same item to different people at the same price d. is the practice of selling the same item to different ethnic groups at different prices

b. is the practice of selling the same item to different people at different prices

Which of the following statements are false? a. Barriers to entry prevent new firms from competing with already existing firms. b. The basic idea of network effects is that the value of some goods rises with the number of other people using them. c. Barriers to entry create a market that is more competitive than it otherwise would be. d. Examples of barriers to entry include patents, unique talents, or sole access to an important input.

c. Barriers to entry create a market that is more competitive than it otherwise would be.

Market transactions, particularly in competitive markets, are determined by a. sellers b. buyers c. buyers and sellers

c. buyers and sellers

A second powerful assumption underpinning economics, according the Charles Wheelan, is the following: a. Firms must decide what to produce, how and where to produce it, how much to produce, and at what price to sell what they produce. b. Firms attempt to maximize profits. c. Firms take inputs -- land, labor, physical capital -- and combine them in a way that adds value d. All of these options are correct.

d. All of these options are correct.

Which of the following statements is false? a. Every market transaction makes all parties better off. b. Behavioral economics combines the disciplines of economics and psychology to offer a more sophisticated insight into how humans make decisions c. Conventional economics assumes that individuals behave rationally when making decisions. d. It is never possible to make rational individuals better off by denying them some option.

d. It is never possible to make rational individuals better off by denying them some option.

Which of the following statements is false? a. The trade off of an action is the sacrifice of the next best alternative. b. The things that give us utility do not have to be material goods. c. The real cost of something is what you must give up in order to get it, which is almost always more than just cash. d. Many social issues, such as birth rate trends, do not involve the concept of economic trade offs.

d. Many social issues, such as birth rate trends, do not involve the concept of economic trade offs.

Which of the following statements is true? a. Markets are usually a good mechanism to allocate scarce goods and resources. b. Government regulation can sometimes improve on market outcomes. c. Incentives matter because they help economists explain how decisions are made d. Trade off exist when a decision maker has to choose a course of action e. All of these options are true

e. All of these options are true