Question 1

According to John Rawls' Theory of Justice, which principle is most central to his idea of a fair society?

Accepted Answer

The difference principle, which allows inequalities only if they benefit the least advantaged.

Question 2

In the context of market power, what does the equation $$p = mc$$ represent?

Accepted Answer

Perfect competition, where price equals marginal cost.

Question 3

If a country moves from autarky (no trade) to free trade, what is the expected effect on its Production Possibility Frontier (PPF) and Consumption Possibility Frontier (CPF)?

Accepted Answer

The CPF expands beyond the PPF, allowing consumption outside domestic production limits.

Question 4

Which economist is associated with the idea that 'as long as property rights are in your favor, markets will work for you'?

Accepted Answer

Ronald Coase

Question 5

What is the main insight from Thomas Piketty's 'Capital' regarding wealth inequality?

Accepted Answer

Wealth tends to concentrate over time unless checked by policy intervention.

Question 6

In the 'Market of Jet Packs' diagram, what does the vertical supply curve suggest about the nature of supply?

Accepted Answer

Supply is perfectly inelastic; quantity does not change with price.

Question 7

Why does the 'Market of Water' diagram show a horizontal demand curve at zero price?

Accepted Answer

Because water is free, demand is perfectly elastic at that price.

Question 8

What is the opportunity cost of producing more of good A in a two-good economy, as shown by the bowed-out PPF?

Accepted Answer

The amount of good B that must be given up due to increasing marginal costs.

Question 9

Which concept explains why countries specialize in producing certain goods and trade with others?

Accepted Answer

Comparative advantage

Question 10

If the marginal cost of producing jet packs is constant but the price is set above marginal cost, what market structure does this indicate?

Accepted Answer

Monopoly or imperfect competition

Question 11

According to Adam Smith, what is the 'invisible hand'?

Accepted Answer

The self-regulating nature of markets where individuals pursuing their own interests benefit society.

Question 12

If a country faces scarcity of skills, what is the likely effect on its opportunity cost for producing high-tech goods?

Accepted Answer

Opportunity cost increases due to limited skilled labor.

Question 13

Which of the following best describes the economic gain from immigration, as noted in the study materials?

Accepted Answer

There is an economic gain to the U.S. when immigrants move freely.

Question 14

What does the equation $$Q = f(K, L)$$ represent in macroeconomics?

Accepted Answer

The production function, showing output as a function of capital and labor.

Question 15

If the price of water is set to zero, what is the likely outcome in terms of resource allocation?

Accepted Answer

Overconsumption and potential depletion due to lack of price signals.

Question 16

Which of the following is a consequence of powerful markets with significant market power?

Accepted Answer

Prices are set above marginal cost, leading to deadweight loss.

Question 17

What is the main argument of David Graeber's 'Debt: The First 5,000 Years'?

Accepted Answer

Debt and credit systems have shaped societies long before the invention of money.

Question 18

If a country faces increasing opportunity costs as it produces more of one good, what does this imply about its PPF?

Accepted Answer

The PPF is bowed outward, reflecting increasing marginal costs.

Question 19

Which policy intervention is most likely to reduce wealth inequality, according to Piketty?

Accepted Answer

Progressive taxation on wealth and inheritance.

Foundations of Market Power, Property Rights, and Economic Trade in Macroeconomics

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