Question

1. True or False: An economic model must be realistic in order to be useful.   
                    
          True                  False

                

2. Does the following set of production possibilities demonstrate the law of increasing costs?

            Good #1        Good #2
                120                0
                100                10
                60                    20
                    0                30   
                    
          Yes
          No
          Not enough information to determine

                

3. Which ONE of the following is NOT one of the 6 foundation principles of economics?   
                    
          People respond to incentives
          People are rational
          There is no such thing as a free lunch
          No thing is just one thing
          Trick question: all of these are among the 6 foundation principles



4. Which of the following are reasons why macro-economic topics are usually more controversial than micro-economic topics? (check all that apply)
     
          Macro-economic analysis is inherently more complex than micro-economic analysis
          For many macro-economic topics, both the direction and the size of an effect matter
          As children, macro-economists never learned how to play well with others
          Macro-economic theories have implications for government policy, and actions in the political sphere have winners and losers



5. What does it mean to say: "There is no such thing as a free lunch"?   
     
          Everyone has their price
          I don`t care so much for money, cause money can`t buy me love
          If restaurants gave away lunches for free, they would soon go bankrupt
          The best things in life are free
          There is always an opportunity cost for the use of a resource

Answer 1

1. True or False: An Economic Model must be realistic inorder to be useful?

        Ans: True

1. Does the following set of production possibilities demonstrate the low of increasing costs?

         Ans: Not enough information to determine

1. Which one of the following is NOT one of the 6 foundation principles of Economics?

           Ans: No thing is just One thing

           The six foundation principles are;

• People Choose (People are rational)
• All choices involves costs(There is no such thing as a free lunch)
• People respond to incentives
• Voluntary Trade Creates Wealth
• The consequences of choices lie in the future
• Economics systems influence individual coices and incentives.

1. Which of the following are reasons why macro-economic topics are usually more controversial than micro-economic topics?

           Ans: All the options that may be the reasons.

• Macro-economic analysis is inherently more complex than micro-economic analysis.
• For many macro-economic topics, both the direction and the size of an effect matter.
• As children, macro economists never learned how to play well with others.
• Macro-economic theories have implications for government policy, and actions in the political sphere have winners and losers.

1. What does it mean to say: "There is no such things as a free lunch"?

          Ans: There is always an opportunity cost for the use of a resource.

          The term "There is no such thing as a free lunch" is one of the 6 foundation principles of economics. It is actually stated in the principle of "All Choices Involve Costs". That means the opportunity cost is the next best alternative forgone for obtaining a thing which explains that when we choose one thing, we refuse something else at the same time.