Question 1

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

In a competitive market, firms will continue to produce and sell products as long as their marginal benefit (the additional benefit received from producing one more unit) outweighs their marginal cost (the additional cost incurred from producing one more unit). This is because firms want to maximize their profits, and producing as much as possible without incurring too much cost is the best way to do so. Therefore, choice A is the correct answer as it accurately reflects this concept.

Question 2

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 able to minimize their costs of production while still producing the goods and services that consumers demand. By producing at the lowest cost, firms are able to offer goods and services at competitive prices, which benefits consumers.

Question 3

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 was a major factor in the downfall of the Soviet Union in 1991. This led to widespread protests, strikes, and uprisings, which ultimately weakened the government's control and ability to function effectively.

Question 4

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

Accepted Answer

Equity refers to the concept of distributing economic benefits in a fair and just manner. It ensures that resources are allocated fairly to all members of society, regardless of their income or social status. Productive efficiency refers to the production of goods and services in the most cost-effective way, while allocative efficiency refers to the allocation of resources in a way that maximizes social welfare. Equality, on the other hand, refers to treating everyone the same.

Question 5

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 (representing consumers) and firms (representing producers) interact in markets to determine what goods and services to produce, how to produce them, and who gets to consume them. This is known as the price mechanism, where prices are set by supply and demand in the market. The state and local governments, large corporations, and the judicial and legislative branches of the federal government do play a role in regulating and overseeing the market economy, but they do not typically make the fundamental economic decisions in the same way that households and firms do.

Question 6

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 7

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

Cutting back on merit scholarships to prioritize need-based programs is a decision motivated by an equity concern, as it aims to reduce the financial burden on lower-income students who have greater financial need.

Question 8

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 occurs when the resources in an economy are allocated to their most valued uses by market forces. In a market economy, voluntary exchange between buyers and sellers allows prices to adjust to reflect the relative scarcity of goods and factors of production, leading to allocative efficiency. National government intervention, United Nations rules for competition, and equity are all factors that can potentially distort market forces and lead to inefficiencies.

Question 9

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 by allowing buyers and sellers to freely compete with each other. This competition helps to drive down prices and drive up quality, promoting efficiency. Additionally, markets operate on the principle of voluntary exchange, which means that transactions only occur when both parties believe they will benefit. This also contributes to efficiency by ensuring that resources are allocated to their most productive uses. Choices A, B, and C are not correct because they do not contribute to the efficiency of markets. Governments playing an active role in markets can lead to inefficiencies and distortions, equitable distribution of goods and services does not necessarily lead to efficiency, and markets do not necessarily promote equal standards of living.

Question 10

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 occurs when resources are allocated in a way that produces the combination of goods and services most preferred by consumers. This means that firms are producing the goods and services that consumers value the most, which maximizes consumer satisfaction or utility. Option A refers to distributive efficiency, which is a separate concept. Option C refers to productive efficiency, which involves producing goods and services at the lowest costs possible. Option D refers to the state of equilibrium in which demand for a good or service is equal to its supply, but this alone does not imply allocative efficiency.

Question 11

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 12

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 allows individuals to make decisions based on their own self-interest, which ultimately results in transactions that benefit both parties. If one party did not believe that they would benefit from the trade, they would not agree to it. This self-interested decision-making can lead to the most efficient allocation of resources in a society.

Question 13

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 products determine what is produced by choosing which products they want to purchase. The suppliers, in turn, produce more of the products that are in demand to meet the consumers' wants and needs. Therefore, those who are willing and able to buy receive the most of what is produced.

Question 14

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, which means that resources are being utilized in the most efficient way and there is no waste or unnecessary expenditure. This leads to maximum output being produced with minimum inputs, which is the ultimate goal of any efficient production process.

Question 15

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 of a good or service is produced up to the point where the marginal benefit to society equals the marginal cost of producing it. This ensures that resources are allocated to their most valued uses and that society is getting the maximum benefit from the use of its resources. Productive efficiency, on the other hand, occurs when a firm is producing output at the lowest possible cost per unit of output. Equity refers to the fairness of the distribution of economic benefits and burdens in society, while efficient central planning relates to a system where a centralized authority makes all economic decision-making.

Question 16

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 is economically efficient because it was a voluntary exchange that benefited both parties. Heidi wanted extra tickets for her guests, and someone who had them was willing to sell them to her for a price she was willing to pay. This created a win-win situation where both parties gained something they valued. It is not relevant whether Heidi paid too much or whether selling items obtained for free is acceptable. The important thing is that the exchange was voluntary and mutually beneficial.

Question 17

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

Accepted Answer

Competition among sellers forces them to find ways to produce goods and services more efficiently in order to offer lower prices, increase profits, and gain a competitive advantage. This results in productive efficiency, which means producing goods and services using the fewest possible resources.

Question 18

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 over all economic decision-making. Such control is most commonly implemented through political dictatorships. Mixed and market economies, on the other hand, allow for greater individual and private sector decision-making and are not necessarily tied to political dictatorships.

Question 19

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 a centrally planned economy, production decisions are made by the government rather than by market forces. Therefore, production managers may focus on meeting the government's orders rather than on producing goods and services that consumers actually want, which can lead to shortages and surpluses of goods and services. This lack of focus on consumer wants is a problem inherent in centrally planned economies. Options A and B are incorrect as they do not reflect the reality of centrally planned economies. Option D may or may not be true, but it is not a problem that is necessarily inherent in centrally planned economies.

Question 20

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 operates on a centrally planned economy, where the government decides on fundamental economic decisions such as what goods and services to produce, how they are produced, and for whom they are produced. Private ownership and markets are limited, and the government controls the majority of the economy.

Quiz 1: Economics: Foundations and Models

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

Productive efficiency is achieved when firms produce goods and services

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

________ occurs when economic benefits are distributed fairly.

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

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 motivated by an equity concern?

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

Which of the following contributes to the efficiency of markets?

Allocative efficiency is achieved when

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?

Voluntary exchange increases economic efficiency

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

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

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.

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?

Competition among sellers generates

All ________ economies have been political dictatorships.

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

How are the fundamental economic decisions determined in Cuba?