Question :
1.3 The First Principle of Economics: Optimization
1) Which of the : 1377281
1.3 The First Principle of Economics: Optimization
1) Which of the following statements is true of optimization?
A) Optimization analysis only relates to the financial budget of an economic agent.
B) Individuals who optimize do not consider costs when choosing the most feasible alternative.
C) Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits.
D) Economic agents who optimize attempt to choose the best feasible option, given the information that they have.
2) Feasible options are options:
A) that are available and affordable.
B) that are available but not affordable.
C) that are affordable but not available.
D) that are optimal for an economic agent.
3) A consumer has $40 that he wants to spend. He is faced with four options: a camera that costs $60, a cell phone that costs $150, a book that costs $10, and an MP3 player that costs $45. Which of the following is a feasible option for the consumer?
A) The book
B) The camera
C) The cell phone
D) The MP3 player
4) A decision or a choice that is made after using optimization analysis:
A) has zero opportunity cost.
B) is not necessarily risk-free.
C) is the same for all individuals.
D) cannot be justified using normative analysis.
5) Which of the following statements is true?
A) Optimization requires individuals to foresee the future perfectly.
B) An optimizing individual need not consider the risks involved in various choices.
C) An optimizing individual is also likely to exhibit rationality.
D) The lesser the information that is available, the easier it is to make optimal decisions.
6) Which of the following statements is true?
A) Rational economic agents maximize more than just monetary income.
B) An individual does not require information to make optimal decisions.
C) The principle of optimization is only accurate when it comes to making monetary decisions.
D) It is not necessary to consider the risks of a particular alternative while making an optimal decision.
7) Which of the following correctly identifies the trade-off that a budget constraint represents?
A) The amount of income that must be given up to obtain an additional unit of a good
B) The maximum amount of two goods that a consumer can purchase given his income
C) The optimum combination of goods that a consumer with a given income should purchase
D) The amount of one good that has to be given up to purchase an additional unit of the other good
8) A budget constraint represents the:
A) total money income that an agent earns in different time periods.
B) goods and services an economic agent can choose given her limited income.
C) inequality in the incomes earned by various economic agents.
D) aggregate income earned by all the firms in an economy.
9) Which of the following statements is true?
A) A budget constraint is the same for a consumer at all levels of income.
B) A budget constraint quantifies the trade-offs that economic agents face while making decisions.
C) A budget constraint is a function of the income of the consumer and not the prices of the goods and services available for consumption.
D) A budget constraint is based on the minimum amount of money that an economic agent can spend on goods and services.
10) A consumer has $20 that he wants to spend on two goods: pens priced at $2 each, and pencils priced at $1 each. Which of the following correctly represents his budget constraint?
A) $20 = ($2/Quantity of pens) + ($1/Quantity of pencils)
B) $20 = ($2 × Quantity of pens) + ($1 × Quantity of pencils)
C) $20 = ($3/Quantity of pens + Quantity of pencils)
D) $20 = $3 × (Quantity of pens – Quantity of pencils)
