Question

1. In general, the demand for a good or service is said to be inelastic (or relatively inelastic) when the price elasticity of demand is greater than one. T/F ?

2. Economies of scale helps explain why small businesses tend to favor high minimum wage laws. T/F ?

3. An increase in the size of the federal government and a decrease in the size of the private sector will tend to increase productivity and increase economic growth. T/F ?

4. According to the Austrian way of thinking, a people will live well only if they produce well; they will produce well only if they work, save and invest. T/F ?

5. Government policies can inhibit productivity. T/F ?

6. Supply curves show an inverse relationship between price and quantity. T/F ?

7. Interest rates can fall to zero, but this does not mean that banks will be able to lend out more money. T/F ?

8. In a free market where there is no government regulations and little union pressure imposed on business, there is a natural tendency toward growing social costs. T/F ?

Answer 1

1.False.When price elasticity of demand is greater than one then it is elastic. It means demand is price sensitive.

2. True This statement is true because the cost of producing goods is more for small companies as compared to large ones. Thus in order to minimise cost, small businesses tend to favour high minimum wage laws so that they can reduce cost and increase profit to reap the benefits of economies of scale.

3.False. There has to be a balance between government sector and private sector. Government sector work for the development of whole country. Private sector if works for profit motive will ultimately boost the economy..

4.True. Austrian thinking believes in less government interventions.

5.False. Government policies using the fiscal policy promote economic growth and development.

6.False. Supply curve shows direct relation between quantity supplied and price. It states higher price leads to higher quantity supplied.

7.True. Banks charge zero interest rates. Instead of receiving money on deposits, they regularly pay to keep it safe. This zero interest rate is a type of boosting the banks so that they can lend more freely and businesses invest or lend or spend rather than pay to keep money safe.

8.True. Yes in free market, there is natural tendency towards social costs.This is because there is no government interventions. These are basically private costs incurred by person involved in transactions along with external cost incurred by third party who is not directly involved in transactions.