Question

1. The invisible hand is:

Select one:

a. a government agency finding inefficiencies

b. the government coordination markets

c. None of the above

d. everyone working for the common good

e. everyone working in their own self-interest

2. The concept of marginal utility:

Select one:

a. all of these are true.

b. can only be applied to situations in which individuals can choose among several goods or services

c. is the change in total utility that comes from consuming one additional unit of a good or service

d. explains why individuals find it difficult to maximize their total utility

3. A perfectly inelastic demand

Select one or more:

a. means a rise in price will lead to a rise in total revenue

b. means the quantity demanded will not change if price drops

c. means the demand curve is vertical

d. means people will not respond to any change in price

e. Means the seller can raise its price.

Answer 1

1. Option E.

• The concept of an invisible hand shows how in a free market without any observable force of control, the market reaches an equilibrium.
• Under this concept, people are considered to be working in their own self interest due to an unseen market control force.
• This will naturally cause the people to maximize their benefits.

2. Option C.

• The concept of marginal utility states that, when consumer's consume an additional unit of any good, they can maximize their total utility.
• In other words, it is the additional satisfaction a person gains by consuming an additional unit of any good or service.

3. Option D.

• A perfectly inelastic demand refers to that demand which does not respond to the changes in price at all.
• This means that consumer's will be indifferent to the consumption of those goods with very high prices when their demand is perfectly inelastic.