Question

1. An economy’s use of resources is efficient if . A. the use of resources in the economy can be further rearranged to make everyone better off B. the use of resources fair and income inequality is small C. one person can be made better off by rearranging how resources are used only by making someone else worse off D. government’s policy is unnecessary

2. Which one of the following concepts is not illustrated by a production possibilities frontier? A. scarcity B. opportunity cost C. the trade-off between producing one good versus another D. society’s preferences over different goods

10. Suppose we observe that the price of sweet corns rises when the income of consumers in the market of sweet corns is higher. It is most likely that . A. Sweet corns are an inferior good B. Sweet corns are a normal good C. Sweet corns are neither an inferior good nor a normal good D. Sweet corns are a substitute for sweet potatoes

11. Suppose that, in Toronto, when the price of beef falls, ceteris paribus, the price of broccoli also falls. This information implies that . A. beef and broccoli in Toronto are complements B. beef and broccoli in Toronto are substitutes C. beef is a normal good while broccoli is an inferior good D. Both beef and broccoli are normal goods

Answer 1

1.the correct answer is c.

If there is a way to rearranging that make everyone better off then this implies that the economy earlier is not efficiently operating. By the definition of pareto efficiency, the economy is operating efficiently only when one person be better off when other one get worse off.

2.society's preference has not been shown in the PPF.

scarcity has been shown by limiting it to the boundry of PPF or one economy can't operate outside the PPF because of scarcity of resouces.

Opportunity cost and trade are the same thung because opportunity cost shows the cost of not producing it and thus trade of one good in respect to other. Thus has been shown by the slope of PPF.

10. When the income of a consumer is higher then he would demand more of a good and with increase in demand price would rise. Which is the present case.

When demand rises with increase in imcome then the good is normal good. Thus, option B is correct.

While for Inferior good demand falls with increase in income.

12. When we are considering good on the basis of price, then we would go for complement and substitute goods.

Suppose beef and broccoli are complimentary goods then both goods would demand together. And with fall in price of beef demand of both goods rises and with increase in demand of broccoli price would fall. Thus, this is not the case.

While if both goods are substitute then with fall in price of good 1 increase its demand and this would cause pressure on good 2 to also fall its price.

Thus, option B is correct.