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Introduction to Modern Economics Premises

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Introduction to Modern Economics Premises

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Questions and Answers

What is one of the main premises upon which modern economics is based?

The irrationality of economic agents

The equal distribution of income

The maximization of social welfare

The rationality of economic agents (correct)

How does a perfectly competitive market economy allocate resources according to the text?

In a sub-optimal way

In a Pareto-inefficient way

In an inefficient manner

In a Pareto-efficient way (correct)

Why could policy-makers still improve the workings of a market economy even if the two main premises of modern economics were correct?

Given that real-world economies are not perfectly competitive (correct)

As a result of unequal income distribution in markets

Because real-world economies are perfectly competitive

Due to the perfectly competitive nature of real-world economies

What does it mean for economic agents to be considered 'rational' in economics?

They maximize expected utility by weighing costs and benefits Signup and view all the answers

What recent developments in the neurosciences challenge the assumption of economic agents' rationality?

The violation of logic and probability rules in reasoning procedures Signup and view all the answers

Why is the assumption of economic agents' rationality considered the backbone of economics?

It involves evaluating costs and benefits to maximize expected utility Signup and view all the answers

What may explain addictive behavior like smoking and gambling according to the text?

Bounded willpower Signup and view all the answers

What is rarely observed in the real world as per Weber's parlance?

Perfect-competition Signup and view all the answers

What is the main source of macroeconomic volatility mentioned in the text?

Financial markets instability Signup and view all the answers

In mainstream economics, what does the 'Rationality Principle' boil down to?

Utility-maximization Signup and view all the answers

What would a descriptive or explanatory theory of rationality include according to the text?

'Willpower' strength Signup and view all the answers

How does the text describe the 'Rationality Principle' in mainstream economics?

'Metaphysical proposition' Signup and view all the answers