Question 1

Which of the following statements is false?
A)Anytime you have to decide which action to take you are facing an economic trade-off.
B)Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale.
C)Every individual, no matter how rich or poor, is faced with making trade-offs.
D)Economics is a social science that studies the trade-offs we are forced to make because of scarcity.

Accepted Answer

Trade-offs always exist, even in cases of excess supply. While the price may be lower during a clearance sale, the consumer must still choose whether to buy the discounted item or save their money for other purchases.

Question 2

Opportunity cost is defined as
A)the benefit of an activity.
B)the monetary expense associated with an activity.
C)the highest valued alternative that must be given up to engage in an activity.
D)the total value of all alternatives that must be given up to engage in an activity.

Accepted Answer

Opportunity cost refers to the alternative options that are forgone when a particular choice is made. Therefore, the correct choice is C, which states that opportunity cost is the highest valued alternative that must be given up to engage in an activity. A is incorrect because benefit is not the same as opportunity cost. B is incorrect because monetary expense is not always the same as opportunity cost. D is incorrect because it is too broad and includes all alternatives, not just the highest valued one.

Question 3

Which of the following is correct about the economic decisions consumers,firms,and the government have to make?
A)Governments may face the problem of shortages but not scarcity in making economic decisions.
B)Only individuals face scarcity; firms and the government do not.
C)Firms and the government face scarcity, individuals only face shortages.
D)Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.

Accepted Answer

Each of the three economic agents - consumers, firms, and the government - face scarcity, which means they have to make choices about how to allocate their limited resources. Scarcity creates the need for trade-offs because each agent has to prioritize some economic goals over others. For example, a consumer might have to choose between buying a new car and saving for retirement, while a government might have to choose between spending on defense and spending on social programs.

Question 4

Article Summary
In an August 2013 speech from the Lincoln Memorial, President Obama was expected to emphasize that increased economic equality is needed to improve racial equality. Economic gaps based on race have endured for 50 years, with the differences in unemployment rates between blacks and whites remaining virtually unchanged and the gap in wealth actually increasing. "If you look at 50 years after the 1960s civil rights movement, the most stubborn and persistent challenge when it comes to the nation's racial challenge remains in the areas of economics and wealth," said Marc Morial, president of the National Urban League.

-Refer to the Article Summary.The article mentions increased economic equality is needed in terms of wealth,and for some people this means a more equitable distribution of wealth.Would an equitable distribution of wealth necessarily be the most efficient distribution of wealth?
A)Yes, equitable and efficient are two different words which have the same definition.
B)Yes, in order for the distribution to be equitable, it must also be efficient.
C)No, it is impossible to have an economically efficient distribution which is also an equitable distribution.
D)No, an economically efficient distribution of wealth would not necessarily be equitable.

Accepted Answer

An economically efficient distribution of wealth may not necessarily be equitable. This is because efficiency often prioritizes maximizing overall productivity and output, which does not always align with principles of fairness and equality. A distribution that is efficient may benefit some individuals or groups disproportionately, leaving others behind.

Question 5

Every society faces economic trade-offs.This means
A)some people live better than others do.
B)not everyone can have enough goods to survive.
C)producing more of one good means less of another good can be produced.
D)society's output cannot be made available to all.

Accepted Answer

Economic trade-offs refer to the fact that producing more of one good means sacrificing the production of another good. This is due to limited resources, such as labor and capital, which cannot be fully utilized in the production of all goods and services at the same time. Therefore, societies must make choices about which goods to produce and how much of each to produce, which leads to economic trade-offs.

Question 6

Which of the following is an example of an economic trade-off that a firm has to make?
A)whether it is cheaper to produce with more machines or with more workers
B)deciding why consumers want its products
C)whether or not consumers will buy its products
D)deciding what profit margin it desires for its products

Accepted Answer

The decision of whether to produce with more machines or more workers is an example of an economic trade-off because it involves choosing between the costs and benefits of each option, and deciding which one will lead to the most efficient use of resources and ultimately the greatest profitability for the firm. The other options listed - deciding why consumers want its products, whether or not consumers will buy its products, and what profit margin it desires for its products - are important considerations for a firm, but they do not necessarily involve a trade-off between different alternatives.

Question 7

In a market economy,________ interact in markets to decide the answers to the fundamental economic questions.
A)state and local governments
B)large corporations
C)households and firms
D)the judicial and legislative branches of the federal government

Accepted Answer

In a market economy, households (consumers) and firms (producers) interact in markets to make decisions about what goods and services to produce, how to produce them, and for whom they will be produced. The other options, such as state and local governments or the judicial and legislative branches of the federal government, may play a role in regulating the market, but they do not determine the allocation of resources in the economy. Large corporations are a type of firm that operates within the market system.

Question 8

Consider the following economic agents:
a.the government
b.consumers
c.producers
Who,in a modern mixed economy,decides what goods and services will be produced with the scarce resources available in that economy?
A)the government
B)producers
C)consumers
D)consumers and producers
E)the government, consumers and producers

Accepted Answer

In a modern mixed economy, the allocation of resources is determined by a combination of government, consumers, and producers. The government sets regulations and policies that affect the market, consumers express their preferences and demands through the choices they make in the marketplace, and producers respond to those demands by producing the goods and services that are most profitable. Therefore, all three agents play a role in determining what goods and services are produced in the economy.

Question 9

How does a market system prevent people from getting as many goods and services as they wish?
A)Governments interfere with the market mechanism to influence the allocation of goods and services.
B)In a market system, firms can charge any price they want, thus preventing poor people from getting as many goods and services as they wish.
C)The market system allocates goods and services to those who are able to pay for those products and therefore income is a limiting factor.
D)The government imposes taxes on those who earn beyond a certain amount of income.

Accepted Answer

In a market system, goods and services are allocated based on the ability to pay. This means that income is a limiting factor on the amount of goods and services people can obtain. Poorer individuals may not be able to afford as many goods and services as they wish, which can prevent them from obtaining everything they desire. Therefore, choice C is the best answer.

Question 10

Who receives the goods and services produced in the United States depends largely on
A)how income is distributed.
B)how the goods and services are produced.
C)what goods and services are produced.
D)government redistribution.

Accepted Answer

The distribution of income in a country determines who will receive the goods and services produced in that country. Those with higher incomes will be able to afford more goods and services, while those with lower incomes may struggle to meet their basic needs. This distribution of income can be influenced by a variety of factors, including government policies and economic opportunities.

Question 11

Article Summary
In an August 2013 speech from the Lincoln Memorial, President Obama was expected to emphasize that increased economic equality is needed to improve racial equality. Economic gaps based on race have endured for 50 years, with the differences in unemployment rates between blacks and whites remaining virtually unchanged and the gap in wealth actually increasing. "If you look at 50 years after the 1960s civil rights movement, the most stubborn and persistent challenge when it comes to the nation's racial challenge remains in the areas of economics and wealth," said Marc Morial, president of the National Urban League.

-Refer to the Article Summary.The article mentions increased economic equality is needed in terms of wealth,and for some people this means a more equitable distribution of wealth.What is meant by a more equitable distribution of wealth?
A)a more allocatively efficient distribution of wealth
B)a more productively efficient distribution of wealth
C)a more fair distribution of wealth
D)wealth distributed based on income levels

Accepted Answer

A more equitable distribution of wealth means a fairer distribution of wealth, where everyone has a more equal share of resources and opportunities. This would involve reducing economic inequality between different social groups, such as racial or ethnic minorities, and ensuring that everyone has equal access to education, healthcare, and employment opportunities.

Question 12

It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish,because failure to do this could ________ the efficiency of the system by producing some goods and services that are ________.
A)reduce; not as highly valued as others
B)increase; not as highly valued as others
C)reduce; valued more than others
D)increase; valued more than others

Accepted Answer

If people are allowed to get as much of the goods and services as they wish, it can lead to overconsumption of certain goods and services which may result in a shortage of these products. This could reduce the efficiency of the economic system. Additionally, not all goods and services are of equal value, and some may be less in demand than others, so restricting access to these less popular goods and services ensures that resources are not wasted on producing too much of them.

Question 13

The town of Harmonia gives away all 500 tickets to its annual Founder's Day Free Concert-in-the-Park to local residents.Each year,more than 500 people wish to attend the concert,so some of the residents who receive the free tickets sell them for as much as $75 each.Is a transaction where someone pays a resident $75 for a "free ticket" economically efficient?
A)No, people should never be allowed to sell items they received for free.
B)Yes, it was a voluntary exchange that benefited both parties.
C)No, the buyer paid too much for the ticket.
D)Yes, it is efficient only from the perspective of the seller and not from the perspective of the buyer.

Accepted Answer

The transaction of selling a free ticket is economically efficient because it is a voluntary exchange that benefits both parties. The seller receives money for a ticket they may not have otherwise used, and the buyer is willing to pay a price they find reasonable to attend the concert. The fact that some people cannot attend the concert without buying a ticket is a reflection of the demand for the event, and the price that buyers are willing to pay reflects that demand. Therefore, as long as the transaction is voluntary, both parties benefit and it is economically efficient.

Question 14

How are the fundamental economic decisions determined in Cuba?
A)Individuals, firms, and the government interact in a market to make these economic decisions.
B)These decisions are made by the country's elders who have had much experience in answering these questions.
C)The government decides because Cuba is a centrally planned economy.
D)The United Nations decides because Cuba is a developing economy.

Accepted Answer

Cuba is a centrally planned economy, which means that the government has control over the fundamental economic decisions such as what goods and services should be produced, how much should be produced, and how they should be distributed. This decision-making process is based on the principles of socialism, which stresses the importance of collective ownership of resources and public control over the means of production. Therefore, option C is the correct answer. Options A, B, and D are incorrect because they suggest a market-driven economy, an arbitrary decision-making process, and external influence over Cuba's economic decisions, respectively.

Question 15

The Stogie Shop,a cigar store in the mall,sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each.What is the opportunity cost of buying a hand-rolled cigar?
A)4 machine-made cigars
B)1/4 of a machine-made cigar
C)$10.00
D)$2.50

Accepted Answer

Opportunity cost is the value of the next best alternative that must be given up in order to pursue a certain action. In this case, if someone chooses to buy a hand-rolled cigar for $10, their opportunity cost is the value of the next best alternative, which is 4 machine-made cigars for $2.50 each (4 x $2.50 = $10.00). Therefore, choice A is the best choice.

Question 16

Trade-offs force society to make choices when answering what three fundamental questions?
A)What will be the prices of goods and services; how will these goods and services be produced; and who will receive them?
B)What goods and services to produce; how will these goods and services be produced; and who receives them?
C)Who gets jobs; what wages do workers earn; and who owns what property?
D)How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

Accepted Answer

The three fundamental economic questions are what goods and services to produce, how to produce them, and who receives them. Trade-offs need to be made in order to decide which goods and services are produced, how they are produced (using what resources and methods), and who receives them (allocation of resources and distribution of income). Option B accurately reflects these three questions and provides the best answer.

Question 17

Ted quits his $60,000-a-year job to be a stay-at-home dad.What is the opportunity cost of his decision?
A)0 since he will no longer be earning a salary
B)depends on the "going rate" for stay-at-home dads
C)at least $60,000
D)the value he attributes to the joy of parenting

Accepted Answer

The opportunity cost of Ted's decision is the value of the best alternative he gave up, which in this case is his $60,000-a-year job. Even though he is no longer earning a salary, he is still giving up the potential income he could have earned from that job. Therefore, the correct choice is C.

Question 18

In a market economy,who decides what goods and services will be produced?
A)only the producers
B)only consumers
C)consumers and producers
D)the government

Accepted Answer

In a market economy, the decisions on what goods and services to produce are influenced by both consumers and producers. Producers produce goods and services based on what they believe consumers will be willing to buy, and consumers purchase goods and services based on their needs and wants. This interaction between consumers and producers ultimately determines which goods and services are produced and how much of them. While the government may sometimes regulate the production of certain goods and services, they do not have complete control over what is produced in a market economy.

Question 19

In a market economy,those who are willing and able to buy what is produced
A)receives what the government allows them to receive.
B)receive the most of what is produced.
C)receive no more than everyone else in the market.
D)solely determine what is produced.

Accepted Answer

In a market economy, those who are willing and able to buy what is produced receive the most of what is produced. This is because producers are incentivized to produce goods and services that consumers are willing to buy, as they want to make a profit. Therefore, those who are most willing and able to buy have more purchasing power and can demand more goods and services. This leads to a situation where those who can afford to buy more receive more of what is produced.

Question 20

Fast food restaurants produce a range of menu items such as hamburgers,chicken sandwiches,salads,and french fries.What fundamental economic question are they addressing by offering this range of items?
A)How to produce goods that consumers want?
B)Why produce a variety of menu items?
C)What to produce?
D)Who to produce the menu items for?

Accepted Answer

Fast food restaurants decide on the variety of menu items to offer based on consumer demand and preferences, addressing the fundamental economic question of "What to produce?" to meet market needs.

Quiz 1: Economics: Foundations and Models

Which of the following statements is false?

Opportunity cost is defined as

Which of the following is correct about the economic decisions consumers,firms,and the government have to make?

Every society faces economic trade-offs.This means

Which of the following is an example of an economic trade-off that a firm has to make?

In a market economy,________ interact in markets to decide the answers to the fundamental economic questions.

Consider the following economic agents: a.the government b.consumers c.producers Who,in a modern mixed economy,decides what goods and services will be produced with the scarce resources available in that economy?

How does a market system prevent people from getting as many goods and services as they wish?

Who receives the goods and services produced in the United States depends largely on

It is necessary for all economic systems to provide people with goods and services and also restrict them from getting as much of these goods and services as they wish,because failure to do this could the efficiency of the system by producing some goods and services that are .

How are the fundamental economic decisions determined in Cuba?

The Stogie Shop,a cigar store in the mall,sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each.What is the opportunity cost of buying a hand-rolled cigar?

Trade-offs force society to make choices when answering what three fundamental questions?

Ted quits his $60,000-a-year job to be a stay-at-home dad.What is the opportunity cost of his decision?

In a market economy,who decides what goods and services will be produced?

In a market economy,those who are willing and able to buy what is produced

Fast food restaurants produce a range of menu items such as hamburgers,chicken sandwiches,salads,and french fries.What fundamental economic question are they addressing by offering this range of items?