MRU7.4: The Great Economic Problem
Q6: Which of the following sequences of events correctly shows the links between the markets mentioned? - Gas prices fall → asphalt prices fall → demand for concrete falls - Gas prices rise → asphalt prices fall → demand for concrete falls - Gas prices fall → asphalt prices rise → demand for concrete rises - Gas prices rise → asphalt prices fall → demand for concrete rises
A: Gas prices fall → asphalt prices fall → demand for concrete falls
Q7: What is the Great Economic Problem? - How to organize production so as to employ as many workers as possible - How to regulate markets to keep prices for necessities as low as possible - How to build foreign exchange markets to stabilize currencies as much as possible - How to arrange our limited resources to satisfy as many of our wants as possible
A: How to arrange our limited resources to satisfy as many of our wants as possible
Q8: Determining society's best response to a decrease in the supply of oil is: - the government's job, because oil is an essential natural resource. - usually left to oil producers, who know more than anyone else about oil's value and cost. - simple, because if supply decreases, price will rise, so quantity demanded should fall. - complicated, because oil is not equally valuable in all of its uses.
A: complicated, because oil is not equally valuable in all of its uses.
Q5: A higher gasoline price will lead to a: - lower asphalt price as refiners attempt to extract less gasoline from oil. - lower asphalt price as refiners attempt to extract more gasoline from oil. - higher asphalt price as refiners attempt to extract more gasoline from oil. - higher asphalt price as refiners attempt to extract less gasoline from oil.
A: higher asphalt price as refiners attempt to extract more gasoline from oil.
Q2: Professor Tabarrok described the impact of the change in the price of a resource as a "ripple" because: - it spreads through the economy by affecting the consumption patterns of many goods. - it spreads through the economy as the spending power of consumer incomes responds to the change in price. - changes in price usually cause other changes that end up completely mitigating the original price change. - changes in price usually tend to go up and down in somewhat symmetrical patterns.
A: it spreads through the economy by affecting the consumption patterns of many goods.
Q3: The best response of the economy to a decrease in the availability of a specific resource is to: - increase the availability of the best substitute for the specific resource. - make adjustments to the consumption of many different goods. - simply reduce the use of that resource and make no other changes. - continue at current consumption patterns, which are still optimal.
A: make adjustments to the consumption of many different goods.
Q4: A change in the price of one good will cause a change in: - the prices of many different goods, but no changes to production and consumption decisions. - the consumption and production decisions of that good alone. - prices, consumption and production decisions, incentives, and choices for many different goods. - the incentives and choices of the buyers of many goods, but no other price changes.
A: prices, consumption and production decisions, incentives, and choices for many different goods.
Q1: Each of the following contributes to an understanding of how the price of oil affects the price of candy bars EXCEPT that: - the demand for sugar is linked to the supply of ethanol. - the price of oil is linked to transportation costs. - the price of candy bars is linked to the price of sugar. - the supply of sugar is linked to the demand for ethanol.
A: the demand for sugar is linked to the supply of ethanol.
Q9: The information problem of central planning is related to the incredible amount of information needed to know: - the price of a certain good, the prices of the inputs for the good, the prices of the inputs to the inputs, and so on. - the people who produce a certain good, the people who employ those people, the people who employ the employers, and so on. - the value of a good in all of its uses, all of the substitutes for a good, the value of the substitutes in all of their uses, and so on. - the place where a good is produced, the place where the good is purchased, the place where the good is consumed, and so on.
A: the value of a good in all of its uses, all of the substitutes for a good, the value of the substitutes in all of their uses, and so on.
Q10: Even if central planners could overcome the information problem and could calculate the best response to a market change, such as a decrease in the supply of oil, central planning would still face the problem that: - there is no guarantee that central planners would be able to create an effective organizational structure. - there is no guarantee that weather and other natural phenomena would cooperate with that best response. - there is no guarantee that central planners have any incentive to carry out that best response. - there is no guarantee that individuals would cooperate with the mandates of the central planners.
A: there is no guarantee that central planners have any incentive to carry out that best response.
