Question

Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means: that consumers seek to get the best value for money from the goods they buy.

Select one:

True

False

“A person earns a wage per hour working at a fast-food restaurant”. This transaction involves

a.

The market for factors of production

b.

The financial market

c.

The market for goods and services

Deadweight loss is the reduction in consumer surplus that results from a tax.

Select one:

True

False

Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means: that consumers will not buy goods which increase their satisfaction by only a small amount.

Select one:

True

False

Answer 1

1. Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means: that consumers seek to get the best value for money from the goods they buy: True.

Rational decision making for consumers implies that consumers wish to maximize their satisfaction or utility from consumption by correctly choosing how to spend their limited income.

2. “A person earns a wage per hour working at a fast-food restaurant”. This transaction involves a. The market for factors of production.

The market for factors of production includes land, labor, capital and entrepreneurship. If a person is working as labor and receiving wage then he is a part of the market for factors of production.

3. Deadweight loss is the reduction in consumer surplus that results from a tax: False.

Deadweight loss of taxation measures the overall economic loss caused by a new tax on a product or service. That is, it is concerned with reduction in total surplus (consumer surplus, producer surpus and government revenue) and not just consumer surplus.

4. Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means: that consumers will not buy goods which increase their satisfaction by only a small amount: False.

Rational decision making for consumers implies that consumers wish to maximize their satisfaction or utility from consumption by correctly choosing how to spend their limited income. That is, it implies consumers will not buy goods which increase their satisfaction by an amount smaller than the price they pay.