Question

In relation to the previous questions, what is the one key variable that answers the fundamental questions about microeconomics and what drives the economy? a). prices b)., Demand c). None of the answers provided is corrects d). Supply Which of the following best describes positive economics? a). It is the way thing are b). It is when the economy is doing very well c). It is a key indicator of how much money consumers are spending d). It is the way things could be Which of the following is used by economics as an example of a perfectly competitive market? a). eBay b). QVC c). The stock market d). NFTA True or False: Since water is important to substaning life, than diamonds, the twin forces of supply and demand dictate that water be just as expensive as diamonds

Answer 1

The key variable that answers the fundamental questions in microeconomics and what drives the economy is prices. Economic agents react to prices they face and the forces of demand and supply are the function of prices.

So the correct option is option a.

Positive economics refers to the statement of things as they are or a description of reality. So the correct option that best describes the positive economics is option a. That is, it is the way things are.

So the correct option is option a.

The example of perfect competition in a way can be stock market since there are large number of sellers and buyers of the same underlying stock and there are no barriers to entry of new buyers and sellers.

So the correct option is option C, the stock market.

The fact that water is more essential for life than diamond is true but the statement that twin forces of demand and supply dictate that water is just as expensive as diamond is false. Since the water on planet is available in abundance relative to diamond. While the demand for water might be high the supply is very low for diamond hence its price is higher than the price of water.

So the statement is false.