Question 1

Every society faces economic trade-offs.This means
A)some people live better than others do.
B)not everyone can have enough goods to survive.
C)producing more of one good means less of another good can be produced.
D)society's output cannot be made available to all.

Accepted Answer

Economic trade-offs refer to the fact that any society has limited resources and has to make choices about how to allocate those resources. This creates a situation where producing more of one good means that fewer resources are available to produce another good. Therefore, the society is forced to make trade-offs and prioritize some goods over others. This situation is captured in choice C, where producing more of one good means less of another good can be produced.

Question 2

Who receives the goods and services produced in the United States depends largely on
A)how income is distributed.
B)how the goods and services are produced.
C)what goods and services are produced.
D)government redistribution.

Accepted Answer

The distribution of income determines who receives the goods and services produced in the United States. If income is distributed equally, then everyone would have access to the same goods and services. However, if income is distributed unequally, then some individuals or groups will have access to more goods and services than others.

Question 3

Which of the following is correct about the economic decisions consumers,firms,and the government have to make?
A)Governments may face the problem of shortages but not scarcity in making economic decisions.
B)Only individuals face scarcity;firms and the government do not.
C)Firms and the government face scarcity,individuals only face shortages.
D)Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.

Accepted Answer

Each of the three economic agents (consumers, firms, and the government) face the problem of scarcity. This means that they have to make trade-offs and prioritize their wants and needs because resources are limited. Scarcity requires economic decision-making in order to allocate resources efficiently. Therefore, the correct option about the economic decisions consumers, firms, and the government have to make is D.

Question 4

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 not restricted from getting as much of goods and services as they want, it could lead to a situation where resources are being inefficiently allocated towards producing goods and services that are not highly valued by society. It is important to prioritize production based on the value that society places on the goods and services being provided. By restricting people's access to some goods and services, it becomes easier to allocate resources towards producing the most valuable goods and services first.

Question 5

Article Summary
Recent studies about wealth inequality and income inequality indicate that the American public's estimates of the distribution of wealth and income are quite different than actual data suggests.With respect to wealth,the top 20 percent of households hold more than 84% and the bottom 40 percent hold less than 1%,yet the public's estimates were 59% and 9%,respectively.In terms of income inequality,the public estimated that the CEO-to-worker pay-ratio was 30-to-1,whereas data suggests the actual ratio is 354-to-1,up from 20-to-1 in the 1960s.
President Obama has referred to economic inequality as "the defining challenge of our time," and although Americans seem to recognize that income and wealth gaps have widened,only 5 percent indicate that this inequality is a problem that needs to be addressed.
-Refer to the Article Summary.The article discusses wealth inequality,and for some people this means a more equitable distribution of wealth is needed in the economy.Would an equitable distribution of wealth necessarily be the most efficient distribution of wealth?
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 wealth would not necessarily be equitable.

Accepted Answer

An economically efficient distribution of wealth would not necessarily be an equitable distribution. Efficiency refers to maximizing productivity and output, while equity refers to fairness and equal distribution. It is possible to have a distribution that is efficient but not equitable, where some individuals or groups may hold a disproportionate amount of wealth.

Question 6

In a market economy,who decides what goods and services will be produced?
A)only the producers
B)only consumers
C)consumers and producers
D)the government

Accepted Answer

In a market economy, goods and services are produced based on the demands and preferences of consumers (consumer sovereignty) and the decisions of producers who aim to maximize their profit. Therefore, both consumers and producers play a role in determining what goods and services will be produced. The government may also play a role in regulating the market or providing certain public goods and services, but it does not generally decide what goods and services will be produced in a market economy.

Question 7

Which of the following is an example of an economic trade-off that a firm has to make?
A)whether it is cheaper to produce with more machines or with more workers
B)deciding why consumers want its products
C)whether or not consumers will buy its products
D)deciding what profit margin it desires for its products

Accepted Answer

Economic trade-offs involve making decisions about allocating limited resources. In this case, the firm needs to decide whether it is more cost-effective to produce with more machines or with more workers. This decision involves weighing the costs and benefits of each option, and choosing the one that maximizes profits. The other options listed do not involve economic trade-offs, but rather market analysis and pricing decisions.

Question 8

Consider the following economic agents: 
A.the government
B.consumers
C.producers
Who,in a modern mixed economy,decides what goods and services will be produced with the scarce resources available in that economy?
A)the government
B)producers
C)consumers
D)consumers and producers
E)the government,consumers,and producers

Accepted Answer

In a modern mixed economy, the decision about what goods and services will be produced with the scarce resources available is influenced by the government, consumers, and producers. The government may set regulations or provide subsidies, consumers express their preferences through demand, and producers decide on the supply based on various factors including consumer demand and government policies.

Question 9

Trade-offs force society to make choices when answering what three fundamental questions?
A)What will be the prices of goods and services;how will these goods and services be produced;and who will receive them?
B)What goods and services to produce;how will these goods and services be produced;and who receives them?
C)Who gets jobs;what wages do workers earn;and who owns what property?
D)How much will be saved;what will be produced;and how can these goods and services be fairly distributed?

Accepted Answer

The three fundamental questions that are answered by society through trade-offs are what goods and services to produce, how these goods and services will be produced, and who will receive them. Option B correctly identifies these questions, making it the best choice. Option A asks about prices, which are determined by the market and not through societal trade-offs. Option C asks about jobs, wages, and property ownership, which are important factors but not the three fundamental questions addressed by trade-offs. Option D asks about savings and distribution, which are also important factors, but not the primary questions addressed by trade-offs.

Question 10

Which of the following statements is false?
A)Anytime you have to decide which action to take you are facing an economic trade-off.
B)Trade-offs do not apply when the consumers purchase a product for which there is excess supply,such as a stock clearance sale.
C)Every individual,no matter how rich or poor,is faced with making trade-offs.
D)Economics is a social science that studies the trade-offs we are forced to make because of scarcity.

Accepted Answer

Trade-offs always exist because resources are scarce. In a stock clearance sale, the trade-off may be between purchasing the discounted product and using the money for something else. So, option B is false.

Question 11

The Stogie Shop,a cigar store in the mall,sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each.What is the opportunity cost of buying a hand-rolled cigar?
A)4 machine-made cigars
B)one-quarter of a machine-made cigar
C)$10.00
D)$2.50

Accepted Answer

The opportunity cost of buying a hand-rolled cigar is the value of the best alternative that must be forgone in order to consume it. In this case, the best alternative is buying machine-made cigars. Therefore, the opportunity cost of buying a hand-rolled cigar is the number of machine-made cigars that could have been bought with the same amount of money. $10.00 divided by $2.50 per machine-made cigar is 4, so the opportunity cost of buying a hand-rolled cigar is 4 machine-made cigars. Therefore, the best choice is A.

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, those who are willing and able to buy what is produced receive the most of what is produced. This is because producers aim to maximize their profits by catering to the demands of consumers who are willing and able to pay for their goods and services. Therefore, those who have the ability to pay for products or services are likely to receive more options and a greater quantity of goods and services than those who cannot afford it.

Question 13

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 that the government decides the fundamental economic decisions.

Question 14

Article Summary
Recent studies about wealth inequality and income inequality indicate that the American public's estimates of the distribution of wealth and income are quite different than actual data suggests.With respect to wealth,the top 20 percent of households hold more than 84% and the bottom 40 percent hold less than 1%,yet the public's estimates were 59% and 9%,respectively.In terms of income inequality,the public estimated that the CEO-to-worker pay-ratio was 30-to-1,whereas data suggests the actual ratio is 354-to-1,up from 20-to-1 in the 1960s.
President Obama has referred to economic inequality as "the defining challenge of our time," and although Americans seem to recognize that income and wealth gaps have widened,only 5 percent indicate that this inequality is a problem that needs to be addressed.
-Refer to the Article Summary.The article discusses wealth inequality,and for some people this means a more equitable distribution of wealth is needed in the economy.What is meant by a more equitable distribution of wealth?
A)a more allocatively efficient distribution of wealth
B)a more productively efficient distribution of wealth
C)a more fair distribution of wealth
D)wealth distributed based on income levels

Accepted Answer

A more equitable distribution of wealth means a more fair distribution of wealth, where the gap between the rich and poor is reduced and a larger percentage of the population has access to resources and opportunities.

Question 15

Fast food restaurants produce a range of menu items such as hamburgers,chicken sandwiches,salads,and french fries.What fundamental economic question are they addressing by offering this range of items?
A)How to produce goods that consumers want?
B)Why produce a variety of menu items?
C)What to produce?
D)Who to produce the menu items for?

Accepted Answer

Fast food restaurants decide on the variety of menu items to offer based on consumer demand and preferences, addressing the fundamental economic question of "What to produce?" to meet market needs.

Question 16

Skeeter's Skeeball Castle has seen its business slow down ever since Kerrie's Off-Key Karaoke opened up next door.Since the opening of Kerrie's Off-Key Karaoke,the opportunity cost of playing skeeball at Skeeter's has
A)decreased.
B)increased.
C)fallen to zero.
D)not changed.

Accepted Answer

The opportunity cost of playing skeeball at Skeeter's has increased since the opening of Kerrie's Off-Key Karaoke because now customers have to weigh the benefits of playing skeeball versus the benefits of singing karaoke. Some customers may choose to go to Kerrie's instead of Skeeter's, causing Skeeter's business to slow down. The increase in competition has raised the opportunity cost of playing skeeball at Skeeter's.

Question 17

Ted quits his $60,000-a-year job to be a stay-at-home dad.What is the opportunity cost of his decision?
A)zero,since he will no longer be earning a salary
B)depends on the "going rate" for stay-at-home dads
C)at least $60,000
D)the value he attributes to the joy of parenting

Accepted Answer

The opportunity cost of Ted's decision is the value of his salary, which is at least $60,000 per year. Opportunity cost refers to the value of the next best alternative that must be given up in order to pursue a certain action. In this case, Ted gave up his job and the income he would have earned from it.

Question 18

Opportunity cost is defined as
A)the benefit of an activity.
B)the monetary expense associated with an activity.
C)the highest valued alternative that must be given up to engage in an activity.
D)the total value of all alternatives that must be given up to engage in an activity.

Accepted Answer

Opportunity cost is the value of the alternative option that must be given up to choose a particular activity. Therefore, the correct option is C, "the highest valued alternative that must be given up to engage in an activity." Options A and B incorrectly describe the benefit or monetary expense associated with an activity, respectively. Option D is incorrect because it states "all alternatives," which is too broad and not specific to the particular alternative being considered.

Question 19

The town of Harmonia gives away all 500 tickets to its annual Founder's Day Free Concert-in-the-Park to local residents.Each year,more than 500 people wish to attend the concert,so some of the residents who receive the free tickets sell them for as much as $75 each.Is a transaction where someone pays a resident $75 for a "free ticket" 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,the buyer paid too much for the ticket.
D)Yes,but it is efficient only from the perspective of the seller and not from the perspective of the buyer.

Accepted Answer

The transaction where someone pays a resident $75 for a "free ticket" is economically efficient because it was a voluntary exchange that benefited both parties. The seller received money for something they didn't need or want, while the buyer got a ticket they wanted at a price they were willing to pay. The fact that the ticket was initially given away for free is irrelevant once the ticket is in the possession of the original recipient. Therefore, choice B is the best answer.

Question 20

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, goods and services are allocated based on the ability to pay for them. Therefore, income becomes a limiting factor in acquiring goods and services. Poor people may not be able to afford as many goods and services as they wish, even if they have the desire to purchase them. Choices A, B, and D are not accurate as they do not adequately address how a market system prevents people from getting as many goods and services as they wish.

Quiz 1: Economics: Foundations and Models

Every society faces economic trade-offs.This means

Who receives the goods and services produced in the United States depends largely on

Which of the following is correct about the economic decisions consumers,firms,and the government have to make?

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 .

In a market economy,who decides what goods and services will be produced?

Which of the following is an example of an economic trade-off that a firm has to make?

Consider the following economic agents: A.the government B.consumers C.producers Who,in a modern mixed economy,decides what goods and services will be produced with the scarce resources available in that economy?

Trade-offs force society to make choices when answering what three fundamental questions?

Which of the following statements is false?

The Stogie Shop,a cigar store in the mall,sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each.What is the opportunity cost of buying a hand-rolled cigar?

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

How are the fundamental economic decisions determined in Cuba?

Fast food restaurants produce a range of menu items such as hamburgers,chicken sandwiches,salads,and french fries.What fundamental economic question are they addressing by offering this range of items?

Skeeter's Skeeball Castle has seen its business slow down ever since Kerrie's Off-Key Karaoke opened up next door.Since the opening of Kerrie's Off-Key Karaoke,the opportunity cost of playing skeeball at Skeeter's has

Ted quits his $60,000-a-year job to be a stay-at-home dad.What is the opportunity cost of his decision?

Opportunity cost is defined as

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