BMAL-590 Microeconomics Exam With Perfect Answers 2025 A+

BMAL-590 Microeconomics Exam With Perfect
Answers 2025 A+.




Microeconomics - CORRECT ANSWER✔✔focuses on individual actions of sellers (producers) and buyers
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(consumers) and how those actions have consequences for the availability, distribution, and utilization of
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scarce resources.
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When we refer to "individual" action, we are referring to: - CORRECT ANSWER✔✔a variety of actors that in
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microeconomic terms can be referred to as sellers (producers) and buyers (consumers). These actors influence
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the supply of and demand for goods and services. The means for achieving coordination are generally money
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and interest rates.
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normative science - CORRECT ANSWER✔✔the idea that science follows objective rules of evidence and is
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unaffected by the personal beliefs or values of scientists
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Microeconomics can be considered a normative science. It does not prescribe a course of action. Rather, it tries
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to explain what might happen as a result of certain changes.
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,For example, if the supply of crude oil decreases, microeconomics suggests that the price of gasoline may
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increase. At a certain level, itmay even suggest that buyers will buy less gasoline.
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Microeconomics has two main schools or streams of thought: - CORRECT ANSWER✔✔One school is the j j j j j j j j j j j j j j




general equilibrium theory (introduced by Leon Walras in1874)
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2nd, is partial equilibrium theory (introduced by Alfred Marshall in 1890). This school of thought believes in
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developing measurable hypotheses related to economic events, and subjecting the hypotheses to empirical
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testing to determine whichof the hypotheses work best.
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Since it is difficult to replicate tests, economists make several assumptions such as infinite sellers and buyers,
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perfect knowledge, homogeneous goods and services, and static relationships to arrive at solutions.
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Austrian school - CORRECT ANSWER✔✔argues that the equilibrium theories are flawed and unrealistic. The
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Austrian school acknowledges imperfections and heterogeneityand tries to explain how economic incentives
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might facilitate individualsovercoming the problems posed by uncertainty and ignorance.
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Thus, the Austrian school proposes that markets exist precisely because people have incomplete knowledge,
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differing preferences, andother imperfections.
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Scarcity - CORRECT ANSWER✔✔requires choice j j j j




Choice - CORRECT ANSWER✔✔refers to people having to choose which of their desires they will satisfy and
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which they will leave unsatisfied.
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When we, either as individuals or as a society, choose more of something, scarcity forces us to have less of
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something else.
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Trade-offs - CORRECT ANSWER✔✔Alternatives that must be given up when one is chosen rather than another
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, All decisions that people make involve trade-offs of one goal against another. To get one thing that we like, we
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usually have to give up another thing that we also like.
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Examples:

- Going to movie night beforeyour final exam leaves less time for a college student to study.
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- Having more money to buy stuff requires working longer hours, which leaves less time for family and
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relaxation.
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efficiency - CORRECT ANSWER✔✔when society gets the most from its scarce resources. j j j j j j j j j j j




equality - CORRECT ANSWER✔✔when prosperity is distributed uniformly among society's members.
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The tradeoff is that to achieve greater equality by redistributing income from higher wage earners to the poor.
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But this redistribution reduces the incentive to work and produce, and it shrinks the size of economic
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prosperity.
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A note about the redistribution of income - CORRECT ANSWER✔✔The redistributionof income from the wage
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earners to poorer people is accomplished through a progressive tax system and well-defined social programs
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like food stamps and unemployment insurance that try to provide a safety net for people at the low endof the
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income distribution. But, a progressive tax system reduces the incentive to work. The reward for working hard is
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a high income. Taxes reduce this reward and therefore reduce the incentive to work hard.
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John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both
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the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that -
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CORRECT ANSWER✔✔People face trade-offs in the decisions that they make.
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opportunity cost - CORRECT ANSWER✔✔of any item is whatever must be given up to obtain it. It is the cost j j j j j j j j j j j j j j j j j j j




associated with the next best alternative only.
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