Question 1

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 2

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. Allocative efficiency refers to the optimal distribution of goods and services for society. Equity refers to fairness and justness in the way resources and benefits are distributed among members of society. Efficient central planning is a theoretical concept in which the government efficiently manages and directs the allocation of resources in the economy, but it has not been successfully implemented in practice.

Question 3

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 are able to produce goods and services at the lowest cost possible. This means that they are maximizing their use of resources and minimizing waste, which allows them to offer their products at a lower price than their competitors. It also allows them to earn higher profits by reducing their production costs. While producing goods and services that are most desired by society and of the highest quality are important, they alone do not necessarily lead to productive efficiency.

Question 4

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 the most efficient way possible, resulting in consumer preferences being met and maximum social welfare being achieved. Alternative answers such as A, C, and D do not encompass the full meaning of allocative efficiency.

Question 5

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 are efficient because they promote healthy competition between buyers and sellers, leading to the provision of high-quality goods and services at the lowest possible prices. They also provide a platform for voluntary exchange of goods and services, which enables individuals to allocate resources according to their preferences and needs. The government's role in the market is to provide a legal framework for the market, but it should not manipulate the day-to-day operations of the market. Markets do not necessarily promote an equal distribution of goods and services or equal standards of living.

Question 6

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 a single, central authority controlling all economic activity. This requires a dictatorship or similar form of authoritarian government to enforce such control. Mixed and market economies, on the other hand, allow for varying degrees of private enterprise and market forces, which do not necessarily require a dictatorship.

Question 7

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 the last unit produced provides a marginal benefit to society equal to the marginal cost of producing it. This means that resources are allocated in the most efficient way possible and that society is getting the most benefit from the resources used. Productive efficiency, on the other hand, occurs when goods and services are produced at the lowest possible cost, while equity refers to fairness and just distribution of resources. Efficient central planning is not a relevant concept to this question as it does not relate to the allocation of resources in a market economy.

Question 8

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 they desire, it could result in an inefficient allocation of resources, where some goods and services are overproduced and valued less, while others are underproduced and valued more. Therefore, it is necessary for economic systems to provide goods and services while also restricting access to them to ensure a more efficient allocation of resources. Option A correctly captures this idea.

Question 9

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 produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. This means that firms will continue to produce and sell a product only if they are making a profit, as the marginal benefit (revenue earned) is greater than the marginal cost (cost of production). Choice A correctly identifies this relationship between marginal benefit and marginal cost. Choice B incorrectly states that firms will continue to produce and sell a product as long as the marginal benefit to consumers exceeds the marginal benefit, which does not make sense. Choice C incorrectly reverses the order of marginal cost and marginal benefit, stating that firms will continue to produce and sell a product as long as the marginal cost exceeds the marginal cost, which again does not make sense. Choice D has the correct order of marginal cost and marginal benefit, but reverses their relationship, stating that firms will continue to produce and sell a product as long as the marginal cost is less than the marginal benefit, which is the opposite of the correct relationship.

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, meaning that the government makes the fundamental economic decisions. Individuals and firms do not have significant input in the decision-making process. The United Nations does not make economic decisions for Cuba. While Cuba has experienced leaders, they do not make decisions independently of the government.

Question 11

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 are produced, how they are produced, and who gets to consume them. State and local governments may play a role in regulating markets, but they do not make the fundamental economic decisions. Large corporations may be important players in certain markets, but they are not the only important economic actors. The judicial and legislative branches of the federal government may create laws that impact markets, but they do not directly participate in the market decision-making process.

Question 12

In a market economy,those who are willing and able to buy what is produced
A) receive 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 principle of supply and demand determines the prices and the quantity of goods and services produced. Those who are willing and able to buy a particular product or service will receive the most of what is produced, as long as they are willing to pay the market price. The government's role is limited to providing an overall framework of laws and regulations that promote competition and protect property rights, but it does not determine the distribution of goods and services.

Question 13

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 could coordinate economic activities

Accepted Answer

The public dissatisfaction with low living standards and political repression is widely regarded as one of the main factors that contributed to the downfall of the Soviet Union. The Soviet economy was not able to provide its citizens with basic necessities, and political freedoms were restricted, leading to widespread discontent among the population.

Question 14

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 managers are directed by the government to produce specific goods, regardless of whether or not there is demand for them. This often results in a disconnect between what consumers actually want and what is being produced, causing dissatisfaction among consumers.

Question 15

Which of the following statements is correct?
A) Mrs. Lovejoy decides to invest in companies which she believes are producing their goods based on the preferences of consumers. Mrs. Lovejoy is therefore investing in companies that are allocatively efficient.
B) Mrs. Lovejoy decides to invest in companies which she believes are producing their goods based on the preferences of consumers. Mrs. Lovejoy is therefore investing in companies that are productively efficient.
C) Mrs. Lovejoy decides to invest in companies which she believes can produce their goods at the lowest possible cost. Mrs. Lovejoy is therefore investing in companies that are allocatively efficient.
D) Mrs. Lovejoy decides to invest in companies which she believes can produce their goods at the lowest possible cost. Mrs. Lovejoy is therefore investing in companies that are both allocatively and productively efficient.

Accepted Answer

Allocative efficiency refers to the situation where resources are allocated in a way that maximizes consumer satisfaction or welfare. Mrs. Lovejoy's investment criteria are based on companies' ability to produce goods based on consumer preferences, which implies that she is investing in companies that are meeting consumer needs and wants. This makes them allocatively efficient as they are producing goods that satisfy consumers. Productive efficiency, on the other hand, refers to the production of goods at the lowest possible cost, which is not Mrs. Lovejoy's criteria for investment.

Question 16

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 17

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, individuals can only purchase goods and services if they have the necessary income to do so. Therefore, limited income can prevent people from getting as many goods and services as they wish. Factors such as government interference and taxation may also play a role, but ultimately it is the limited income of individuals that places constraints on their ability to acquire goods and services.

Question 18

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 means that both parties involved in a trade agree to it willingly because they perceive that they will benefit from it. This means that resources are allocated more efficiently because trades would only occur if both parties receive some form of benefit. This in turn leads to a more efficient allocation of resources in the economy.

Question 19

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 to the most valued uses based on consumer preferences. In a market economy, voluntary exchange between buyers and sellers determines prices, which are signals for how resources should be allocated. Therefore, option B, voluntary exchange between buyers and sellers, generates allocative efficiency in a market economy. The other options do not necessarily lead to allocative efficiency - national government intervention may cause inefficiencies due to bureaucracy, United Nations rules do not necessarily apply to all markets, and equity is a separate concept from resource allocation.

Question 20

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

Accepted Answer

Competition among sellers generates productive efficiency, as firms strive to produce goods and services at the lowest possible cost in order to be competitive and attract consumers. Allocative efficiency refers to the efficient allocation of resources according to consumer preferences, which is influenced by competition among sellers but is not directly generated by it. Equity and scarcity are not directly related to competition among sellers.

Quiz 1: Economics: Foundations and Models

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?

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

Productive efficiency is achieved when firms produce goods and services

Allocative efficiency is achieved when

Which of the following contributes to the efficiency of markets?

All ________ economies have been political dictatorships.

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.

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 .

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

How are the fundamental economic decisions determined in Cuba?

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

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

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

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

Which of the following statements is correct?

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?

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

Voluntary exchange increases economic efficiency

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

Competition among sellers generates