Define the three key principles of economics
What will be an ideal response?
a) Optimization: Optimization refers to the process of choosing the best option from a set of alternatives, given the available information.
b) Equilibrium: Equilibrium is a special situation where everyone is simultaneously optimizing, so that nobody would benefit personally by changing his or her behavior.
c) Empiricism: Empiricism is analysis that is evidence-based as it uses data to test theories and to determine what is causing things to happen in the world.
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Explain the connection between the price of a financial asset and its interest rate
What will be an ideal response?
The higher the interest rates
a. the more value individuals place on future dollars b. the more value individuals place on current dollars c. individuals do not place any importance on either current or future dollars d. does not affect the investment strategy
A decrease in the price of rice from 50 cents to 40 cents a pound increases consumption from 16 to 20 tons a week in Gainesville and from 160 to 200 tons in the larger city of Miami. The elasticity of demand for rice is
a. greater in Miami than in Gainesville, even taking into account the population difference. b. greater in Gainesville than in Miami in spite of the population difference. c. equal in Gainesville and Miami regardless of the population difference. d. impossible to compare because of the population difference.
The U.S. government has more than 10,000 tariff classifications and more than half of them are subject to interpretation.
a. true b. false