Question

1. suppose that a family decides to spend all of their available money on a fancy vacation instead of purchasing a much - needed new automobile. from an economists perspective, which of the following statements about this decision are likely to be true? a the decision is rational in the sense that it reflects the familys preference for vacations over new automobiles. b. the decision is irrational because anyone can see that choosing a vacation over a much - needed automobile is an improper use of scarce resources. c. the decision must have been made haphazardly and is therefore irrational. d. the family have poor microeconomic skills. 7. an economy is composed entirely of two equally sized farms a and b producing eggs and milk. farm a is better at producing eggs than farm b which is better at producing milk. then in order to maximize output, farm a should: a. abandon the production of milk to fully specialize in the production of eggs and then trade with farm b for milk. b produce both eggs and milk on its own and sell its excess eggs to b for additional milk. c. reduce its production of eggs in order to commit resources to learn how to better produce milk. 8. if the economy is currently experiencing low growth and inflation combined with unemployment, it is likely to be at which phase of the business cycle? a. recession or contraction b. expansion c trough d. peak 9. as an evolution of international trade, globalization involves: a. a shift towards a more integrated world economy b. trade across two or more countries c. trade in services as well as goods d. a standardization of culture and beliefs 10. there are a number of strategies a business can use to gain access to foreign markets. exporting is considered to be ____ means of entering a foreign market. a. the best long - term b. a risk - free c. the fastest and least expensive d. a capital - intensive 11. joint ventures and foreign strategic alliances are approaches used with large - scale, capital intensive projects.

Explanation:

1. In economics, rationality is based on individual preferences. If a family prefers vacations over a new automobile, their decision to spend on vacations is rational according to their preference.
2. Based on the principle of comparative - advantage, a farm should specialize in producing the good it is better at and trade for the other good to maximize overall output.
3. The trough phase of the business cycle is characterized by low growth, high unemployment, and often inflationary pressures.
4. Globalization is about the increasing integration of the world economy, involving more interconnectedness in trade, finance, etc.
5. Exporting is often considered the fastest and least expensive way to enter a foreign market as it requires less investment compared to other methods like setting up a subsidiary.

Answer:

1. A. The decision is rational in the sense that it reflects the family's preference for vacations over new automobiles.
2. A. Abandon the production of milk to fully specialize in the production of eggs and then trade with Farm B for milk.
3. C. trough
4. A. a shift towards a more integrated world economy
5. C. the fastest and least expensive