Question 1

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests.Suppose your classmate,Heidi purchased two tickets for $40 each.Is this transaction 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, Heidi paid too much for the tickets.
D) Yes, it is efficient only from the perspective of the seller and not from the perspective of the buyer.

Accepted Answer

The transaction between Heidi and the ticket seller was voluntary, meaning both parties agreed to the exchange. Heidi was willing to pay $40 per ticket, and the seller was willing to accept that amount. Therefore, both parties benefited from the exchange and it is economically efficient. The fact that the tickets were originally free does not affect the efficiency of the transaction, as long as the exchange was voluntary and both parties were satisfied with the outcome.

Question 2

Which of the following generates allocative efficiency in a market economy?
A) national government intervention
B) voluntary exchange between buyers and sellers
C) United Nations rules for competition
D) equity

Accepted Answer

Allocative efficiency is achieved when resources are allocated in a way that maximizes social welfare, which is achieved through voluntary exchange between buyers and sellers in a market economy. Government intervention and rules from international organizations may help to ensure competition and prevent market failures, but they do not necessarily generate allocative efficiency. Equity is a separate concept related to fairness in the distribution of resources.

Question 3

Dr.Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services.How can Dr.Goldfinger strive to achieve this productive efficiency?
A) by investing in companies that produce goods and services based on consumer preferences
B) by investing in companies that produce goods and services at the lowest possible cost
C) by investing in companies that fairly distribute their products and services
D) by investing in companies that produce up to the point where the marginal benefit of the last unit produced is equal to the marginal cost of producing it.

Accepted Answer

The answer of Dr.Goldfinger decides to invest in companies which...

Question 4

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it,________ occurs.
A) allocative efficiency
B) productive efficiency
C) equity
D) efficient central planning

Accepted Answer

Allocative efficiency occurs when resources are allocated in a way that maximizes the net benefit or surplus derived from their use. This happens when the production of every good or service is at a quantity where the marginal benefit to society equals the marginal cost of producing it. This ensures that the resources are used to produce the goods and services that are most valued by consumers, and therefore maximizes overall welfare.

Question 5

All ________ economies have been political dictatorships.
A) centrally planned
B) mixed
C) market
D) mixed and market

Accepted Answer

Centrally planned economies are characterized by government control of production and distribution, and this level of control is typically only possible in political dictatorships. Mixed and market economies have elements of private enterprise and competition, which are incompatible with dictatorship.

Question 6

Voluntary exchange increases economic efficiency
A) because neither the buyer nor the seller would agree to a trade unless they both benefit.
B) because voluntary exchange only takes place with government permission.
C) because it is free and consequently does not cost anything.
D) because it allows wealthy individuals to act altruistically and give to the poor.

Accepted Answer

Voluntary exchange occurs when both the buyer and seller agree to the terms of the exchange. This means that both parties see a benefit in the exchange, whether it be a good, service, or financial transaction. Therefore, voluntary exchange allows for resources to be allocated efficiently and effectively, as it ensures that resources are being used in a way that benefits both parties.

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 decide what goods and services to produce (What to produce), how to produce these goods and services (How to produce), and for whom these goods and services are produced (For whom to produce). The state and local governments, large corporations, and the judicial and legislative branches of the federal government may have some role in regulating and supporting the market economy, but they do not directly decide the fundamental economic questions.

Question 8

When goods and services are produced at the lowest possible cost,________ occurs.
A) allocative efficiency
B) productive efficiency
C) equity
D) efficient central planning

Accepted Answer

Productive efficiency occurs when goods and services are produced at the lowest possible cost, meaning that no resources are wasted in the production process. This allows for maximum output with minimum input, resulting in lower prices and higher profits for businesses. Allocative efficiency, on the other hand, refers to the optimal distribution of resources among different goods and services to meet the needs and wants of society. Equity is the concept of fairness in the distribution of resources and benefits among different individuals and groups. Efficient central planning refers to a system in which a central authority makes decisions about the allocation of resources and production of goods and services, with the goal of maximizing efficiency and meeting the needs of society.

Question 9

Dr.Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services.What would Dr.Goldfinger need to do to try to achieve allocative efficiency?
A) invest in companies that produce goods and services based on consumer preferences
B) invest in companies that produce goods and services at the lowest possible cost
C) invest in companies that fairly distribute their products and services
D) invest in companies that produce up to the point where the marginal cost of the last unit produced is zero.

Accepted Answer

Allocative efficiency is achieved when the production of goods and services aligns with consumer preferences, indicating that resources are allocated based on what consumers value most.

Question 10

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 the government makes all fundamental economic decisions.

Question 11

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, the consumers who are willing and able to buy a particular good or service drive the production and distribution of that good or service. Producers will produce more of what is in demand and will charge higher prices for it, while goods or services that are not as desirable will not be produced as much. Therefore, those who are willing and able to buy the most of what is produced will receive the most of what is produced.

Question 12

Productive efficiency is achieved when firms produce goods and services
A) most desired by society.
B) at the highest profit margin.
C) at the lowest cost.
D) of the highest quality.

Accepted Answer

Productive efficiency is achieved when firms produce goods and services at the lowest cost possible. This means that the firm is minimizing their production costs while still producing the desired level of output. By doing so, the firm can maximize their profits and potentially offer lower prices to consumers. The other options, while important, do not necessarily lead to productive efficiency.

Question 13

Which of the following is a problem inherent in centrally planned economies?
A) There are no problems and everyone, including consumers, is satisfied.
B) There is too much production of low-cost, high-quality goods and services.
C) Production managers are more concerned with satisfying government's orders than with satisfying consumer wants.
D) Unemployment is too high.

Accepted Answer

In centrally planned economies, production decisions are made by the government, and production managers are more concerned with satisfying government orders than with satisfying consumer wants. This often leads to oversupply of goods that are in less demand, and undersupply of goods that are in high demand. This results in inefficiency and waste, and consumers are often not satisfied with the quality or availability of goods and services.

Question 14

Which of the following contributed to the downfall of the Soviet Union in 1991?
A) public dissatisfaction with low living standards and political repression
B) producing higher-quality goods than were desired by consumers
C) the rapidly increasing standard of living
D) the lack of a strong dictator who can coordinate economic activities

Accepted Answer

Public dissatisfaction with low living standards and political repression played a major role in the downfall of the Soviet Union in 1991. This led to protests, and ultimately, the collapse of the government. Producing higher-quality goods than were desired by consumers and the rapidly increasing standard of living were not factors in the downfall of the Soviet Union. While the lack of a strong dictator could have contributed to economic issues, it was not the primary cause of the Soviet Union's collapse.

Question 15

Competition forces firms to produce and sell products as long as the ________ to consumers exceeds the ________ of production.
A) marginal benefit; marginal cost
B) marginal benefit; marginal benefit
C) marginal cost; marginal cost
D) marginal cost; marginal benefit

Accepted Answer

Competition forces firms to maximize profits by producing and selling products as long as the marginal benefit (the additional satisfaction that consumers receive from consuming the product) exceeds the marginal cost (the additional cost incurred from producing one more unit of the product).

Question 16

Which of the following is motivated by an equity concern?
A) Some U.S. colleges have cut back on merit scholarships since these programs siphon money from need-based programs, thus harming lower-income students with greater financial need.
B) Following the removal of subsidies in urban water use, household demand for water decreased quite significantly in Bogor, Indonesia.
C) In November 2003, the Federal Communications Commission implemented the "local number portability" rule which gives cell phone customers the option of keeping their number when they switch carriers within the same geographic region.
D) The United States protects intellectual property rights, allowing inventors to prevent others from using their inventions without payment.

Accepted Answer

Option A is motivated by an equity concern because the cutback in merit scholarships harms lower-income students who have a greater need for financial support. This is an issue of fairness and ensuring that all students, regardless of their financial background, have access to the necessary resources for higher education.

Question 17

Allocative efficiency is achieved when
A) goods and services are fairly distributed among consumers in an economy.
B) firms produce the goods and services that consumers value most.
C) firms produce goods and services at the lowest cost.
D) there are no shortages or surpluses in the market.

Accepted Answer

Allocative efficiency is achieved when firms produce the goods and services that consumers value most. This means that resources are allocated in a way that maximizes social welfare and consumer satisfaction. When firms produce what consumers value most, they create the most utility, leading to a Pareto efficient allocation of resources.

Question 18

Competition among sellers generates
A) productive efficiency.
B) allocative efficiency.
C) equity.
D) scarcity.

Accepted Answer

Competition among sellers incentivizes them to produce goods and services at the lowest possible cost, which leads to productive efficiency. This means that resources are being used in the most efficient way possible to produce goods and services. However, competition does not necessarily result in allocative efficiency, equity, or scarcity. Allocative efficiency occurs when resources are allocated in a way that maximizes social welfare, while equity refers to fairness in the distribution of resources. Scarcity refers to the fact that resources are limited, which is a fundamental concept in economics.

Question 19

Which of the following contributes to the efficiency of markets?
A) Governments play an active role in the day-to-day operations of markets.
B) Markets are able to bring about an equitable distribution of goods and services.
C) Markets promote equal standards of living.
D) Markets promote competition and voluntary exchange.

Accepted Answer

Markets promote competition and voluntary exchange, which leads to efficiency by encouraging producers to innovate, offer better products at lower prices, and allocate resources effectively in response to changes in supply and demand. The other options (A, B, and C) are incorrect because they do not contribute to market efficiency. Government intervention in markets can sometimes lead to inefficiencies, markets do not necessarily promote an equitable distribution of goods and services, and markets do not guarantee equal standards of living.

Question 20

________ occurs when economic benefits are distributed fairly.
A) Productive efficiency
B) Allocative efficiency
C) Equality
D) Equity

Accepted Answer

Equity is the fair distribution of economic benefits. Productive efficiency is achieved when products are produced at the lowest possible cost, and allocative efficiency is achieved when resources are distributed in a way that maximizes societal welfare. While these concepts are important for economic analysis, they do not relate specifically to the issue of fair distribution.

Quiz 1: Economics: Foundations and Models

Selling tickets to graduation ceremonies has long been a tradition among students at institutions that limit the number of guests.Suppose your classmate,Heidi purchased two tickets for $40 each.Is this transaction economically efficient?

Which of the following generates allocative efficiency in a market economy?

Dr.Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services.How can Dr.Goldfinger strive to achieve this productive efficiency?

When every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it,________ occurs.

All ________ economies have been political dictatorships.

Voluntary exchange increases economic efficiency

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

When goods and services are produced at the lowest possible cost,________ occurs.

Dr.Goldfinger decides to invest in companies which he believes can "improve the productivity and efficiency" of health care services.What would Dr.Goldfinger need to do to try to achieve allocative efficiency?

How are the fundamental economic decisions determined in Cuba?

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

Productive efficiency is achieved when firms produce goods and services

Which of the following is a problem inherent in centrally planned economies?

Which of the following contributed to the downfall of the Soviet Union in 1991?

Competition forces firms to produce and sell products as long as the to consumers exceeds the of production.

Which of the following is motivated by an equity concern?

Allocative efficiency is achieved when

Competition among sellers generates

Which of the following contributes to the efficiency of markets?

________ occurs when economic benefits are distributed fairly.