Are you Economically Literate?

HAMISH_MCTAVISH

20 (thanks to Gen) - but also disagree with 16

michaels

Generali wrote: »

The argument is that more competition drives up standards and drives down prices.

@ equilibrium, in the short term some existing outlets might cut quality to compete in price before going bankrupt.

Which brings us on to q9. At equilibrium does producers determine what is produced? Surely production will depend entirely on consumer and govt demand...

Generali

michaels wrote: »

@ equilibrium, in the short term some existing outlets might cut quality to compete in price before going bankrupt.

Which brings us on to q9. At equilibrium does producers determine what is produced? Surely production will depend entirely on consumer and govt demand...

Producers impact on what is made via the allocation of scarce capital so I agree with their answer for that.

michaels

Generali wrote: »

Producers impact on what is made via the allocation of scarce capital so I agree with their answer for that.

But producers do not (in classical economic theory) invest on vanity projects but only in assets that will satisfy demand...

CLAPTON

producers innovate

Generali

michaels wrote: »

But producers do not (in classical economic theory) invest on vanity projects but only in assets that will satisfy demand...

The reality however is that you do what you do.

I work for an asset manager: no matter how profitable coal mining gets we are highly unlikely to mine coal.

chewmylegoff

I got 19/20, because the answer to question 8 is wrong. As ne fule kno, if you cap rents then all greedy BTLers will sell, the price of houses will crash and everyone will receive a free 4 bedroom detached house upon turning 18, thus there will be no demand for rentals at all!

Also, why did someone give a "don't know" option in a multiple choice test!

antrobus

uncreative wrote: »

Bah,

19/20. I got the first one wrong. A significant increase in fast food restaurants will drive down price AND quality in my view. Why would quality go up overall? the price point would result in it being uneconomic for lower prices to support higher quality in the short term. Advertising and other differentiators would surely kick in before the quality would start to eventually rise (and be charged a premium for!)

Or am I just thinking too short term....???

You were psychologically duped by the clever wording of the question. If supply increases relative to demand, then obviously competition will force prices down and quality up. That's what competition does in a free market. But the question cleverly refers to "fast food restaurants". Since lots of people have a dim view of those establishments, it encourages people to give an answer influenced by their own prejuduces rather than one based on economics.

That's why it's a test of economic literacy.

ERICS_MUM

uncreative wrote: »

Bah,

19/20. I got the first one wrong. A significant increase in fast food restaurants will drive down price AND quality in my view. Why would quality go up overall? the price point would result in it being uneconomic for lower prices to support higher quality in the short term. Advertising and other differentiators would surely kick in before the quality would start to eventually rise (and be charged a premium for!)

Or am I just thinking too short term....???

This is the Q I got wrong. I agree with your reasoning. 19/20 but I feel cheated !

PasturesNew

16/20. Although my eyes glazed over as it was so dull.