Question 1

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

Accepted Answer

In a market economy, the decision about what goods and services will be produced is made by consumers and firms choosing which goods and services to buy or produce. In this system, producers respond to consumer demand by producing goods and services that are in demand, and they adjust production levels accordingly. This means that consumers have a significant influence on what is produced in the market economy, as they ultimately determine what will be profitable for firms to produce.

Question 2

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

Accepted Answer

In a centrally-planned economy, the government is responsible for making decisions about what goods and services will be produced. Lawmakers and planners in the government determine what is needed and allocate resources accordingly. Workers and producers do not typically have input in these decisions, and consumers do not have a choice in what is produced.

Question 3

Which of the following is motivated by an efficiency concern?

Accepted Answer

Banning homeowners from watering their lawns is motivated by an efficiency concern because it aims to conserve water, a resource that may be limited or scarce. This measure is intended to ensure that water is used only for essential purposes, such as drinking and hygiene.

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.
Source: Zachary A. Goldfarb, "For Obama, 50 years after historic march, economic equality the path to racial justice," Washington Post, August 17, 2013.

-Refer to the Article Summary.The article mentions increased economic equality is needed in terms of wealth.How would a more equal distribution of wealth differ from a more equitable distribution of wealth?

Accepted Answer

"Equal" typically refers to a more even distribution, while "equitable" typically refers to a more fair distribution. Therefore, a more equal distribution of wealth would mean a more even distribution, while a more equitable distribution of wealth would mean a more fair distribution.

Question 5

How are the fundamental economic decisions determined in Canada?

Accepted Answer

Canada has a mixed economy where individuals, firms, and the government interact in a market to make fundamental economic decisions. The government also plays a role in regulating and enforcing policies to ensure fair competition and to address market failures.

Question 6

________ occurs when economic benefits are distributed fairly.

Accepted Answer

Equity is the concept of fairness in the distribution of economic benefits. It is concerned with ensuring that benefits are divided among individuals in a fair and just manner. Allocative efficiency, on the other hand, is concerned with distributing resources in a way that maximizes social welfare, while productive efficiency relates to using resources in the most efficient way possible. Equality is a broader concept that encompasses not just economic benefits, but also social, political, and cultural rights and opportunities.

Question 7

Mrs.Lovejoy decides to invest in companies which she believes can produce its goods at the lowest possible cost.Mrs.Lovejoy is investing in companies that are

Accepted Answer

Mrs. Lovejoy's investment strategy is based on minimizing production costs, which makes the companies she is investing in productively efficient. This does not necessarily imply that these companies are also allocatively efficient or always profitable.

Question 8

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?

Accepted Answer

Opportunity cost is the value of the next best alternative that you have to give up in order to make a decision. In this scenario, if you choose to buy a gallon of milk for $2.50, the opportunity cost would be the value of the eggs that you could have bought instead of the milk. For $2.50, you can buy 1 gallon of milk, or you can buy 1 2/3 dozen eggs (which would cost $2.50 as well, since 1 dozen eggs costs $1.50). Therefore, the best choice for the opportunity cost of buying a gallon of milk is A) 1 2/3 dozen eggs.

Question 9

There is often a trade-off between

Accepted Answer

The answer of There is often a trade-off between
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Question 10

The government makes all economic decisions in a centrally planned economy.

Accepted Answer

In a centrally planned economy, also known as a command economy, the government controls all aspects of the economy, including production, distribution, and pricing of goods and services.

Question 11

Mrs.Lovejoy decides to invest in companies which she believes are producing its goods based on the preferences of consumers.Mrs.Lovejoy is investing in companies that are

Accepted Answer

Mrs. Lovejoy is investing in companies that produce goods based on consumer preferences, indicating that these companies are allocating resources in a way that satisfies consumer demands. This suggests that they are allocatively efficient, but there is no information provided about whether they are also productively efficient or always profitable. Thus, B is the best choice.

Question 12

Which of the following is motivated by an equity concern?

Accepted Answer

The decision to cut back on merit scholarships is motivated by an equity concern, as it aims to prioritize need-based programs to ensure that lower-income students are not disproportionately disadvantaged.

Question 13

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?

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 14

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

Accepted Answer

The inability of the Soviet Union to produce low-cost consumer goods that households wanted was a significant contributing factor to its downfall in 1991. This, combined with economic inefficiencies, led to a decline in living standards and widespread dissatisfaction among citizens, ultimately resulting in the collapse of the Soviet Union.

Question 15

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?

Accepted Answer

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

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?

Accepted Answer

Since Heidi voluntarily purchased the tickets for $40 each, it can be assumed that she valued attending the graduation ceremony higher than the money she paid for the tickets. Similarly, the seller valued the money more than attending the ceremony with the extra guests. Therefore, this transaction is economically efficient as it resulted in a mutually beneficial exchange where both parties gained.

Question 17

Competition among sellers generates

Accepted Answer

Competition among sellers leads to productive efficiency as sellers strive to create the highest-quality goods at the lowest possible price in order to attract more buyers than their competitors.

Question 18

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

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 19

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?

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 20

When voluntary exchange takes place,only one party gains from the exchange.

Accepted Answer

Voluntary exchange is a mutually beneficial transaction where both parties involved gain from the exchange. Otherwise, the exchange would not take place.

Quiz 1: Economics: Foundations and Models