Question

Which notion from below best explains people's decision-making process from an economic perspective?

People's behavior reflects rational self-interest

Costs are more important than benefits

Land is a scarce resource while labor is not

Scarcity is more important than choice

The government Yelpia decides to build more four-year universities. Consequently, the resources used for the program become unavailable for improvements in the high school system. This problem demonstrates the concept of:

Unintended consequences.

Industry-specific unemployment.

Opportunity cost.

Production expenses.

Economics studies remarkably complex problems of real life by constructing models. Those models are made by using:

Tradeoffs

Simplifications

Predictions

Value judgments

Angela notes that "a study shows that there is a high level of student debt in the US." Greg agrees and adds that "government should make the college free."

Both Angela's and Greg's statements are normative

Both Angela's and Greg's statements are positive

Angela's statement is positive while Greg's statement is normative

Angela's statement is normative while Greg's statement is positive

Assume a direct relationship is graphed. What is true?

Such relationships rarely exist in economics

Slope calculation gives a positive number

As one variable increases the other declines in value.

The line is down-sloping.

Answer 1

Q1.

The concept which reflects people's decision making process in regard to economic choices is known as rationality. Thus, the decision making process best explains people's behavior reflects rational self-interest. (ans-a)

Q2.

Using resources to build more four year universities will lower the resources available for improvements in high school due to scarcity of economic resources. When the Government decides to build more universities than schools, the schools are the next best alternative that are given up to build universities. We term this cost as an opportunity cost. (ans-c)

Q3.

Economics studies complex real world problems by building models that are simpler and easier to understand with the help of assumptions. Subsequently, these are relaxed to make the model more generic. (ans -b)

Q4.

Positive statements are ones that assert facts and statements while normative statements involve a value judgement. The former answer "What is" while the latter answer "What should/ought to be?"

Thus, here, Angela's statement is positive since it asserts facts while that of Greg is normative since it involves value judgement. (ans- c)

Q5.

When a direct relationship is graphed, it implies a one to one correspondence between the 2 variables,ie, as the value of 1 variable increases, the value of the other variable increases too and vice-versa. Slope calculation in such a case yields a positive number. (ans- b)