Question

1. The button maker’s guild in seventeenth century _________ was ________of cloth buttons.

1. France // hostile to the making

2. England // mystified by the making

3. American colonies // raising tariffs in order to encourage the domestic manufacturing

4. England // unable to finance factories sufficiently large for the making

2. Why is abstraction used in economics?

a. because economics is basically an emotional subject, and one must let one’s emotions determine the best way to run an economy

b. to simplify and objectively look at economic phenomena

c. to give economics a mathematic character, which the author concedes makes it difficult for many students

d. both b) and c) are correct

3. Externalities can be ________ by collective (i.e.) ________ action.

a. enhanced // market

b. internalized // market

c. internalized // government

d. externalized // government

4. What do monopolistic competition, pure monopoly, and oligopoly have in common?

a. They are deviations from perfect competition

b. They lead to better outcomes for the consumer than perfect competition since they are a more realistic way to organize the market.

c. Both of these.

5. Revenue maximization, kinked demand curve and game theory are used to describe which market structure?

a. oligopoly

b. pure monopoly

c. monopolistic competition

d. perfect competition

e. both a) and b) are correct.

6. Collectivized means

a. common ownership, a characteristic of socialism.

b. common ownership, a characteristic of capitalism.

c. giving capitalists and entrepreneurs equal rights to the means of production.

d. both b) and c) are correct.

Answer 1

1. The button maker's guild in seventeenth century France was hostile to the making of cloth buttons.

2. Abstraction is used in economics to simplify and objectively look at economic phenomena.

Simplifying the complexities of the real world by ignoring unimportant details while doing economic analysis. Abstraction is an important feature of the scientific method.

3. Externalities can be internalized by collective market action.

The government may make regulation in order for the private sector to work towards internalizing the externalities. For example, air pollution through coal fired power plants which is a negative externality can be internalized by charging carbon taxes.

4. Monopolistic competition, pure monopoly, and oligopoly all three of these market structures have one thing in common and it is that they are deviation from perfect competition.

Monopolistic competition is nearest to perfect competition whereas monopoly is farthest as far competition is concerned.

5. Revenue maximization, kinked demand curve and game theory are used to describe oligopoly.

6. Collectivized means common ownership, a characteristic of socialism.