Chapter 7

1. Which of the following statements is correct?

• Buyers always want to pay less and sellers always want to be paid more.

• Buyers always want to pay less and sellers always want to be paid less.

• Buyers always want to pay more and sellers always want to be paid more.

• Buyers always want to pay more and sellers always want to be paid less. 

Welfare economics is the study of how 

• The allocation of resources affects economic well-being.

• a price ceiling compares to a price floor.

• The government helps poor people.

• a consumer’s optimal choice affects her demand curve.

Welfare economics is the study of

• taxes and subsidies.

• how technology is best put to use in the production of goods and services.

• government welfare programs for needy people.

• how the allocation of resources affects economic well-being.

Welfare economics is the study of

• the well-being of less fortunate people.

• welfare programs in the United States.

• how the allocation of resources affects economic well-being.

• the effect of income redistribution on work effort.

The study of how the allocation of resources affects economic well-being is called

• consumer economics.

• macroeconomics

• willingness-to-pay economics.

• welfare economics.

An example of positive analysis is studying 

• how market forces produce equilibrium.

• whether equilibrium outcomes are fair.

• whether equilibrium outcomes are socially desirable.

• if income distributions are fair.

An example of normative analysis is studying

• how market forces produce equilibrium.

• surpluses and shortages.

• whether equilibrium outcomes are socially desirable.

• income distributions.

Which of the Ten Principles of Economics does welfare economics explain more fully?

• The cost of something is what you give up to get it.

• Markets are usually a good way to organize economic activity.

• Trade can make everyone better off.

• A country’s standard of living depends on its ability to produce goods and services.

Which of the Ten Principles of Economics does welfare economics explain more fully?

• The cost of something is what you give up to get it.

• Rational people think at the margin.

• Markets are usually a good way to organize economic activity.

• People respond to incentives.

One of the basic principles of economics is that markets are usually a good way to organize economic activity. This principle is explained by the study of

• factor markets.

• energy markets.

• welfare economics.

• labor economics.