Question 1

Which of the following is motivated by an efficiency concern?
A)In 2009,the Obama administration increased unemployment benefits.
B)As part of an economic stimulus package,each taxpayer received a $3,000 tax rebate check.
C)Following a six-month drought,a city banned homeowners from watering their lawns in an effort to conserve water.
D)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.

Accepted Answer

The banning of watering lawns in order to conserve water is motivated by an efficiency concern, as it reduces water waste and ensures that the available water supply is being used in the most efficient way possible.

Question 2

Article Summary
In a January,2017 report,the World Economic Forum stated that the growing income gap has become one of the biggest threats to the global economy and cannot be remedied solely by higher economic growth.Although income inequality has fallen over the past 30 years on a global level,in high-income countries like the United States and the United Kingdom,the top 1% of income earners have benefitted disproportionately from economic growth.This has led a growing belief that the traditional model for economic growth does not result in a population-wide increase in income.According to the report,"The growing mood of anti-establishment populism suggests we may have passed the stage where [reviving economic growth] alone would remedy fractures in society: reforming market capitalism must also be added to the agenda." 
Source: Lauren Gensler,"Rising Income Inequality Is Throwing The Future Of Capitalism Into Question,Says World Economic Forum," Forbes,January 11,2017.
-Refer to the Article Summary.The article discusses income inequality and how economic growth alone is no longer resulting in a more equitable distribution of income.Would an equitable distribution of income necessarily be the most efficient distribution of income?
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 income would not necessarily be equitable.

Accepted Answer

An economically efficient distribution of income would prioritize productivity and the allocation of resources based on market demand, which may result in some individuals and groups having a higher income than others. Therefore, it may not necessarily be equitable in terms of equal distribution of income among all individuals.

Question 3

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 seller of the tickets is economically efficient because it was a voluntary exchange that benefited both parties. Heidi was willing to pay $40 per ticket to attend the graduation ceremony with her guests, and the seller was willing to sell the tickets at that price. Both parties deemed the exchange to be mutually beneficial, which is the hallmark of a voluntary transaction in a free market economy. Choices A, C, and D are incorrect because they do not accurately reflect the economic efficiency of this transaction.

Question 4

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

Accepted Answer

Allocative efficiency refers to the optimal allocation of resources to produce the goods and services that consumers value the most, while productive efficiency refers to producing goods and services at the lowest possible cost. Equality refers to treating everyone the same, regardless of individual differences or circumstances. Therefore, the only option that fits the definition of distributing economic benefits fairly is D) Equity.

Question 5

There is often a trade-off between
A)productive efficiency and allocative efficiency.
B)limited and unlimited resources.
C)voluntary and involuntary exchanges.
D)economic efficiency and economic equity.

Accepted Answer

The answer of There is often a trade-off between
A)productive efficiency...

Question 6

The Farm Factory,a booth at the local Farmer's Market,sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon.What is the opportunity cost of buying a gallon of milk?
A)1 2/3 dozen eggs
B)3/5 of a dozen eggs
C)$2.50
D)$1.50

Accepted Answer

The opportunity cost is the value of the next best alternative that must be forgone in order to purchase the gallon of milk. To calculate the opportunity cost of a gallon of milk at The Farm Factory, we need to compare the price of milk with the price of eggs. We can buy 1 gallon of milk for $2.50 or we can buy 1.67 dozens of eggs for $2.50 ($2.50 ÷ $1.50 per dozen = 1.67 dozen). Therefore, the opportunity cost of buying a gallon of milk is 1.67 dozens of eggs. The closest answer option is A, which is equivalent to 1 2/3 dozen eggs.

Question 7

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 8

Which of the following is not an example of an efficiency-equity trade-off faced by economic agents?
A)According to an article by in the American Journal of Public Health by Edward Kaplan and Michael Merson of Yale University School of Medicine,the federal government's current method of allocating HIV-prevention resources is not cost-effective.Instead of allocating resources to states in proportion to reported AIDS cases,resources should flow first to those activities that prevent more infections per dollar and then to less and less effective combinations of programs and populations until funds are exhausted,even if it means that some populations would be left without any prevention services.
B)Concerned about the falling birth rate,the French government has pledged more money for families with three children,in an effort to encourage working women to have more babies.
C)The growing demand for corn by ethanol producers has led to a surge in the price of tortillas,a staple in the Mexican diet.To quell public outcry over rising tortilla prices,the Mexican government released government corn stocks at prices well below the market,and pressured states to impose price ceilings on tortillas.
D)Some U.S.colleges cut back on merit scholarships since these programs siphon money from need-based programs,thus harming lower-income students with greater financial need.

Accepted Answer

Option B is not an example of an efficiency-equity trade-off as it is solely focused on promoting equity by providing financial incentives to families with three children. It does not involve any trade-off between efficiency and equity. The other options involve trade-offs between efficiency and equity, such as prioritizing cost-effective HIV prevention programs over regions with high reported AIDS cases, releasing government corn stocks and imposing price ceilings on tortillas to ensure affordability for low-income consumers, and balancing merit-based and need-based scholarships to support students with different levels of financial need.

Question 9

How are the fundamental economic decisions determined in Canada?
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 Canada is a centrally planned economy.
D)The United Nations decides because Canada is a developing economy.

Accepted Answer

In Canada, the fundamental economic decisions are determined through market interaction between individuals, firms, and the government. This indicates that Canada has a mixed economic system where both market forces and government intervention play a role in decision-making.

Question 10

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 is achieved when resources are allocated in a way that is consistent with consumer preferences. Therefore, if Mrs. Lovejoy is investing in companies that are producing goods based on consumer preferences, she is investing in companies that are allocatively efficient. Productive efficiency, on the other hand, refers to producing goods at the lowest possible cost.

Question 11

Which of the following contributed to the downfall of the Soviet Union in 1991?
A)government dissatisfaction with high living standards and political freedom
B)an inability to produce low-cost consumer goods that households wanted
C)an overabundance of high-quality goods and services
D)the lack of a strong dictator who could coordinate economic activities

Accepted Answer

The Soviet Union had an inability to produce low-cost consumer goods that households wanted, leading to dissatisfaction among the population and contributing to the downfall of the government.

Question 12

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

The decision to cut back on merit scholarships in favor of need-based programs is motivated by an equity concern, as it aims to provide greater support for students with lower financial resources who may not have access to other forms of financial assistance.

Question 13

The decision about what goods and services will be produced in a centrally planned economy is made by
A)lawmakers in the government deciding on what will be produced.
B)workers deciding to produce only what the boss says must be produced.
C)producers deciding what society wants most.
D)consumers and firms choosing which goods and services to buy or produce.
E)consumers dictating to firms what they need most.

Accepted Answer

In a centrally planned economy, the government plays a dominant role in decision-making and decides what goods and services will be produced based on their own priorities and goals, rather than allowing the free market to determine production based on consumer demand. Therefore, lawmakers in the government decide what will be produced.

Question 14

The Farm Factory,a booth at the local Farmer's Market,sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon.What is the opportunity cost of buying a dozen eggs?
A)1 2/3 gallons of milk
B)3/5 of a gallon of milk
C)$2.50
D)$1.50

Accepted Answer

The opportunity cost of buying a dozen eggs is what you give up to buy the eggs instead. Since a dozen eggs costs $1.50 and a gallon of milk costs $2.50, you give up the opportunity to buy $1.50/$2.50 = 3/5 of a gallon of milk.

Question 15

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 ownership and control of resources and economic decision-making. In such economies, the government imposes its economic policies on the people, and therefore, these economies are usually associated with political dictatorships.

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

Investing in companies that produce goods and services at the lowest possible cost aligns with the goal of improving productivity and efficiency in health care services.

Question 17

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 18

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 productively 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 both allocatively and 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 productively 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 allocatively efficient.

Accepted Answer

Productive efficiency means producing goods at the lowest possible cost. Therefore, Mrs. Lovejoy is investing in companies that are productively efficient by seeking out those that can produce their goods at the lowest possible cost. Allocative efficiency, on the other hand, refers to the production of the goods that consumers demand at a price that reflects the marginal cost of production. Mrs. Lovejoy's investment strategy does not necessarily reflect her concern for allocative efficiency.

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 in a market economy is achieved through voluntary exchange between buyers and sellers. Buyers are willing to pay a higher price for goods and services they value the most, while sellers are incentivized to produce goods and services that are in high demand. This leads to the allocation of resources to their most valued uses, resulting in allocative efficiency. National government intervention, United Nations rules for competition, and equity may all play a role in a market economy, but they do not necessarily lead to allocative efficiency.

Question 20

The decision about what goods and services will be produced in a market economy is made by
A)lawmakers in the government voting on what will be produced.
B)workers deciding to produce only what the boss says must be produced.
C)producers deciding what society wants most.
D)consumers and firms choosing which goods and services to buy or produce.
E)consumers dictating to firms what they need most.

Accepted Answer

In a market economy, consumers and firms decide what goods and services to produce by choosing which ones to buy or produce. This is done through the mechanism of supply and demand, where goods and services that are in high demand are produced more while those in low demand are produced less or not at all. Market economies rely on the principle of self-interest to allocate resources and determine what is produced.

Quiz 1: Economics: Foundations and Models

Which of the following is motivated by an efficiency concern?

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?

________ occurs when economic benefits are distributed fairly.

There is often a trade-off between

The Farm Factory,a booth at the local Farmer's Market,sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon.What is the opportunity cost of buying a gallon of milk?

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?

Which of the following is not an example of an efficiency-equity trade-off faced by economic agents?

How are the fundamental economic decisions determined in Canada?

Which of the following statements is correct?

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

Which of the following is motivated by an equity concern?

The decision about what goods and services will be produced in a centrally planned economy is made by

The Farm Factory,a booth at the local Farmer's Market,sells fresh eggs for $1.50 per dozen and fresh milk for $2.50 per gallon.What is the opportunity cost of buying a dozen eggs?

All ________ economies have been political dictatorships.

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?

Competition among sellers generates

Which of the following statements is correct?

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

The decision about what goods and services will be produced in a market economy is made by