ECON 2150 Final Exam Real Questions And Correct
Answers 100% Accurate
The likely result if government taxed away all profits would be
a. a more rapid shift of resources to expanding industries.
b. the removal of the most important incentive for resource allocation.
c. improved market signals and responses.
d. increased information about temporary shortages and surpluses
e. enhanced efficiency in resource allocation. - ANSWER b. the removal of the most
important incentive for resource allocation.
Which of the following is NOT a reason for increased reliance on unhampered market
processes for allocating resources: a. the price system coordinates trillions of
independent economic decisions automatically.
b. with competition, the price of resources tend toward their discounted marginal
revenue product.
c. the function of markets are enhanced if there are positive externalities associated
with production or consumption.
d. market processes mitigate disequilibrium situations.
e. prices are information signals wrapped in an incentive. - ANSWER c
All but which of the following are causes of government failure to improve upon market
based outcomes:
a. transactions costs.
b. imperfect knowledge.
c. bureaucratic rigidities.
d. political constraints.
e. Informational asymmetries. - ANSWER a
,Negative externalities often arise from an absence of:
a. self-sufficiency.
b. absolute advantage.
c. theft.
d. private property rights.
e. scarcity. - ANSWER d
In an unhampered market, differences in returns to labour reflect differences in:
a. marginal product of labour.
b. natural ability.
c. acquired relevant skills, knowledge, and experience.
d. all of the above.
e. none of the above. - ANSWER D
Positive externality - ANSWER A positive externality occurs when a benefit spills over
to a third-party, someone other than the producer or the consumer.
Originary (natural) interest rate - ANSWER An indiviudal's time preference,
specifically, the ratio of value assigned to want satisfaction in the immediate future and
the value assigned to want satisfaction in remote periods of the future. Originary
interest is the outgrowth of millions of individual evaluations in the market and is
therefore constantly changing. The amount that people save rises with decreasing
originary interest and falls with increasing originary interest.
Price ceiling - ANSWER Price ceiling - The mandated maximum amount a seller is
allowed to charge for a product or service. creates a shortage
Path dependency - ANSWER Path dependency - A concept that describes a situation
where past events or decisions constrain later events or decisions. The outcome is the
continued, institutionalized use of a product or practice—despite the availability of
, seemingly more efficient options
Why does Callahan praise "bugs" in computer operating systems? Would his reasoning
also apply to inputs in agriculture and agri-food? Explain. - ANSWER Callahan asks if
achieving bug-free software is in the customer's best interest. The answer is no, and
economics is the reason. Resources are scarce meaning that trade-offs must be made
between timing, cost, and quality. "...where resources are scarce, consumption
involves choosing A while foregoing B. Software can be made more reliable only by
leaving out features, or increasing the cost of developing it, or both. Consumers'
preferences in regard to this trade-off are embodied in their actual purchases." In other
words, bug-free is too costly. Where issues remain are the focal points of
entrepreneurial opportunity to resolve them, profitably - ultimately making final
products better from the vantage point of consumers. This reasoning applies with equal
validity in agricultural and agrifood markets. There is always room for improvement in
our world of scarcity. An outworking of scarcity are the less-than-perfect goods that we
less-than-perfect beings actually can produce. The opportunity cost of perfection often
is immesurable and boundless.
What are the effects of price supports for agricultural products? How might they lead to
results that even its proponents would consider worse than the initial state of affairs? -
ANSWER Price supports are government imposed price limit on how low a price can be
charged for a product, good, commodity, or service. When set above that which would
occur in an unhampered market, it creates an effective price floor where the quantity
supplied will exceeds the quantity demanded --- draw the picture. Three negative
effects: 1/ Quantity demanded falls as the price support rises. 2/ Discovering themselves
unable to sell all of the output they are willing to sell at the price floor, producers reduce
their production. They produce no greater amount than consumers are willing to buy at
the high price floor. (So while price ceilings always create shortages, price floors don't
always create physical surpluses.) 3/ Creates incentive for further intervention for
surplus to be withheld from the market through storage or destruction, or given away as
aid. Each alternative is costly and had cascading effects. Each of these negative effects,
from the point of view of the proponents are even worse than the previous state of
affairs which they government wanted to alter. If the government, to eliminate these
inevitable but unwelcome consequences, pursues its course further and further, it
finally transforms the market process based system of private ownership and freedom
of exchange into a thoroughly choreographed, centrally planned one.
How does an artificially lower interest rate produce a business cycle? - ANSWER
Suppressing interest rates below natural market levels fuel an unsustainable economic
boom. It disconnect the cost of credit from genuine consumer time preferences and real
resource availability. Artificially low rates incentivize increased investment spending
Answers 100% Accurate
The likely result if government taxed away all profits would be
a. a more rapid shift of resources to expanding industries.
b. the removal of the most important incentive for resource allocation.
c. improved market signals and responses.
d. increased information about temporary shortages and surpluses
e. enhanced efficiency in resource allocation. - ANSWER b. the removal of the most
important incentive for resource allocation.
Which of the following is NOT a reason for increased reliance on unhampered market
processes for allocating resources: a. the price system coordinates trillions of
independent economic decisions automatically.
b. with competition, the price of resources tend toward their discounted marginal
revenue product.
c. the function of markets are enhanced if there are positive externalities associated
with production or consumption.
d. market processes mitigate disequilibrium situations.
e. prices are information signals wrapped in an incentive. - ANSWER c
All but which of the following are causes of government failure to improve upon market
based outcomes:
a. transactions costs.
b. imperfect knowledge.
c. bureaucratic rigidities.
d. political constraints.
e. Informational asymmetries. - ANSWER a
,Negative externalities often arise from an absence of:
a. self-sufficiency.
b. absolute advantage.
c. theft.
d. private property rights.
e. scarcity. - ANSWER d
In an unhampered market, differences in returns to labour reflect differences in:
a. marginal product of labour.
b. natural ability.
c. acquired relevant skills, knowledge, and experience.
d. all of the above.
e. none of the above. - ANSWER D
Positive externality - ANSWER A positive externality occurs when a benefit spills over
to a third-party, someone other than the producer or the consumer.
Originary (natural) interest rate - ANSWER An indiviudal's time preference,
specifically, the ratio of value assigned to want satisfaction in the immediate future and
the value assigned to want satisfaction in remote periods of the future. Originary
interest is the outgrowth of millions of individual evaluations in the market and is
therefore constantly changing. The amount that people save rises with decreasing
originary interest and falls with increasing originary interest.
Price ceiling - ANSWER Price ceiling - The mandated maximum amount a seller is
allowed to charge for a product or service. creates a shortage
Path dependency - ANSWER Path dependency - A concept that describes a situation
where past events or decisions constrain later events or decisions. The outcome is the
continued, institutionalized use of a product or practice—despite the availability of
, seemingly more efficient options
Why does Callahan praise "bugs" in computer operating systems? Would his reasoning
also apply to inputs in agriculture and agri-food? Explain. - ANSWER Callahan asks if
achieving bug-free software is in the customer's best interest. The answer is no, and
economics is the reason. Resources are scarce meaning that trade-offs must be made
between timing, cost, and quality. "...where resources are scarce, consumption
involves choosing A while foregoing B. Software can be made more reliable only by
leaving out features, or increasing the cost of developing it, or both. Consumers'
preferences in regard to this trade-off are embodied in their actual purchases." In other
words, bug-free is too costly. Where issues remain are the focal points of
entrepreneurial opportunity to resolve them, profitably - ultimately making final
products better from the vantage point of consumers. This reasoning applies with equal
validity in agricultural and agrifood markets. There is always room for improvement in
our world of scarcity. An outworking of scarcity are the less-than-perfect goods that we
less-than-perfect beings actually can produce. The opportunity cost of perfection often
is immesurable and boundless.
What are the effects of price supports for agricultural products? How might they lead to
results that even its proponents would consider worse than the initial state of affairs? -
ANSWER Price supports are government imposed price limit on how low a price can be
charged for a product, good, commodity, or service. When set above that which would
occur in an unhampered market, it creates an effective price floor where the quantity
supplied will exceeds the quantity demanded --- draw the picture. Three negative
effects: 1/ Quantity demanded falls as the price support rises. 2/ Discovering themselves
unable to sell all of the output they are willing to sell at the price floor, producers reduce
their production. They produce no greater amount than consumers are willing to buy at
the high price floor. (So while price ceilings always create shortages, price floors don't
always create physical surpluses.) 3/ Creates incentive for further intervention for
surplus to be withheld from the market through storage or destruction, or given away as
aid. Each alternative is costly and had cascading effects. Each of these negative effects,
from the point of view of the proponents are even worse than the previous state of
affairs which they government wanted to alter. If the government, to eliminate these
inevitable but unwelcome consequences, pursues its course further and further, it
finally transforms the market process based system of private ownership and freedom
of exchange into a thoroughly choreographed, centrally planned one.
How does an artificially lower interest rate produce a business cycle? - ANSWER
Suppressing interest rates below natural market levels fuel an unsustainable economic
boom. It disconnect the cost of credit from genuine consumer time preferences and real
resource availability. Artificially low rates incentivize increased investment spending
