Question 1

________ is a situation in which a good or service is produced at the lowest possible cost.
A)Allocative efficiency
B)Productive efficiency
C)Equity
D)Optimal marginalism

Accepted Answer

Productive efficiency is a situation in which a good or service is produced at the lowest possible cost. This means that all available resources are being used in the most efficient way to produce the good or service. Allocative efficiency, on the other hand, refers to a situation in which resources are allocated in a way that maximizes social welfare. Equity is concerned with fairness and the distribution of resources. Optimal marginalism is the idea that decisions should be made by comparing the marginal benefits and costs of each option.

Question 2

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

Accepted Answer

North Korea has a centrally planned economy, which means that the government determines and controls the fundamental economic decisions. Individuals and firms have limited economic freedom and are subject to government control and regulation. The elders or the United Nations do not play a significant role in making economic decisions in North Korea.

Question 3

Markets promote
A)equity and competition.
B)voluntary exchange and equality.
C)equity and equality.
D)competition and voluntary exchange.

Accepted Answer

Markets promote competition, through which businesses compete to offer better products and services at lower prices, and voluntary exchange, through which individuals are free to choose the goods and services they want to buy or sell. Markets do not necessarily promote equity or equality as these can be influenced by various factors outside of the market.

Question 4

All of the following contributed to the downfall of the Soviet Union in 1991 except
A)public dissatisfaction with low living standards and political repression.
B)an inability to produce low-cost consumer goods that households wanted.
C)lack of high-quality goods and services.
D)lack of a strong dictator who can coordinate economic activities.

Accepted Answer

The lack of a strong dictator was not a contributing factor to the downfall of the Soviet Union. In fact, it could be argued that the presence of a strong dictator, such as Stalin, contributed to the repression and economic stagnation that ultimately led to the collapse of the Soviet Union. The other choices, A, B, and C, all played significant roles in the downfall, with public dissatisfaction, inability to produce desired consumer goods, and lack of high-quality goods contributing to the overall economic and political instability.

Question 5

Which of the following is a problem inherent in centrally planned economies?
A)Households and firms make poor decisions in choosing how resources are allocated.
B)There is too little production of low-cost, high-quality goods and services.
C)Production managers are more concerned with satisfying consumer wants than with satisfying government's orders.
D)Exports tend to exceed imports.

Accepted Answer

In centrally planned economies, the government controls the allocation of resources and production decisions, which can lead to a lack of competition and innovation. This often results in lower-quality goods and services being produced at higher costs, which means there is too little production of low-cost, high-quality goods and services.

Question 6

Which of the following is motivated by an equity concern?
A)Some provinces and municipalities have transferred funds to food bank programs in order to increase benefits to lower-income families.
B)Following the implementation of subsidies for energy conservation, household demand for rooftop solar panels increased quite significantly in BC.
C)Some provinces allow automotive insurance companies to charge men and women different rates for insurance.
D)Canada offers patent protection to pharmaceutical manufacturers to prevent others from duplicating their products.

Accepted Answer

Providing funds to food bank programs to increase benefits to lower-income families is motivated by an equity concern as it aims to address income inequality and provide support to those who may be in need of additional assistance.

Question 7

Allocative efficiency is achieved when firms produce goods and services
A)at the lowest possible cost.
B)that consumers value most.
C)at the lowest opportunity cost.
D)at a marginal cost of zero.

Accepted Answer

Allocative efficiency is achieved when firms are producing the goods and services that consumers value most. This means that resources are being allocated towards the production of goods and services that are in high demand, rather than being wasted on goods and services that have little or no value to consumers. Therefore, option B is the correct answer.

Question 8

Which of the following generates productive efficiency?
A)competition among sellers
B)competition among buyers
C)government inspectors
D)government production rules and regulations

Accepted Answer

Competition among sellers encourages firms to minimize costs and improve production efficiency in order to offer lower prices and increase market share. This leads to productive efficiency, which is achieved when the firm produces at the lowest possible cost.

Question 9

Who receives the most of what is produced in a market economy?
A)lawmakers and other politically favored groups
B)those who are willing and able to buy them
C)Everyone receives an equal amount.
D)people who earn the highest incomes

Accepted Answer

In a market economy, the allocation of goods and services is determined by the laws of supply and demand. Those with the ability and willingness to pay the market price will receive the goods and services, so ultimately it is the individuals who earn the highest incomes that are able to purchase the most and receive the most of what is produced.

Question 10

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?
A)Failure to do this could reduce the efficiency of the system by producing some goods and services that are not as highly valued as others.
B)Failure to do this could lead to an inequitable allocation of goods and services produced.
C)Failure to do this could lead to drastic shortages of good and services.
D)Failure to do this could reduces efficiency and leads to an inequitable allocation of output.

Accepted Answer

The answer of Why is it necessary for all economic...

Question 11

When production reflects consumer preferences, ________ occurs.
A)allocative efficiency
B)productive efficiency
C)equity
D)efficient central planning

Accepted Answer

Allocative efficiency occurs when production reflects consumer preferences, meaning that resources are being allocated efficiently towards producing goods and services that consumers actually want to buy. This results in a better use of resources and a more efficient allocation of goods and services in the economy.

Question 12

Which of the following is motivated by an efficiency concern?
A)In 2013 the Alberta government handed out pre-paid credit and debit cards to flood victims.
B)The right to purchase tickets to the Grey Cup is decided by a lottery.
C)Organ transplant waiting lists rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs.
D)The federal government Equilization program which makes larger transfers to poor provinces than to wealthy ones.

Accepted Answer

Rationing scarce kidneys to favor young patients over old is motivated by an efficiency concern because it is an attempt to use the available resources (donated organs) in the most efficient way possible to maximize the amount of time that can be gained from those organs. This approach seeks to ensure that the greatest number of patients benefit from the limited number of organs available for transplantation, rather than allowing some patients to receive organs just because they are older or have been on the waiting list for longer.

Question 13

Which of the following statements is true about competition in a market?
A)Competition forces firms to out source the production of their labor-intensive products.
B)Competition forces firms to undercut their selling price, thus benefiting consumers who will be able to purchase products at the lowest price possible.
C)Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production.
D)Competition forces firms to add only low profit margins to their costs of production.

Accepted Answer

Competition in a market forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production, which ensures that resources are allocated efficiently and used to produce the goods and services that society values the most. This leads to a more competitive and efficient market, where firms are constantly innovating to improve their products and reduce their costs, which benefits consumers in terms of lower prices and higher quality products. The other choices are incorrect because competition does not force firms to outsource or add low profit margins to their costs of production, and while firms may sometimes undercut their prices in order to attract customers, this is not the primary effect of competition.

Question 14

Productive efficiency is achieved when
A)firms add a low profit margin to the goods and services they produce.
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

Productive efficiency is achieved when firms produce goods and services at the lowest cost possible. This means that they are minimizing their production costs and using resources in the most efficient way possible to produce their output. This allows them to offer goods and services at lower prices and therefore be more competitive in the market.

Question 15

Voluntary exchange between buyers and sellers generates ________ in a market economy.
A)scarcity
B)allocative efficiency
C)productive efficiency
D)equity

Accepted Answer

Voluntary exchange between buyers and sellers in a market economy leads to allocative efficiency, which occurs when resources are allocated to their most valuable use based on consumer preferences. This results in the production of goods and services that are most desired by consumers and maximizes societal satisfaction. Scarcity, productive efficiency, and equity are important concepts in economics but are not directly related to the effects of voluntary exchange in a market economy.

Question 16

How are the fundamental economic questions answered in a market economy?
A)The government alone decides the answers.
B)Individuals, firms, and the government interact in markets to decide the answers to these questions.
C)Households and firms interact in markets to decide the answers to these questions.
D)Large corporations alone decide the answers.

Accepted Answer

The answer of How are the fundamental economic questions answered...

Question 17

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.
A)Competition
B)Voluntary exchange
C)Equity
D)A centrally planned economy

Accepted Answer

Competition incentivizes firms to be efficient in their production and pricing in order to attract customers and remain competitive. This results in firms producing goods and services at the lowest possible cost while still meeting consumer needs, leading to greater economic efficiency.

Question 18

Political candidates often hold fund raisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Is this transaction economically efficient?
A)No, political candidates should never be allowed to overcharge for a fund raising dinner.
B)Yes, it was a voluntary exchange that benefited both parties.
C)No, Wendy paid too much for four dinners.
D)Yes, it is efficient only from the perspective of the candidate but not from the perspective of Wendy.

Accepted Answer

The transaction between Wendy and the political candidate was voluntary and mutually beneficial. Wendy was willing to pay $4,000 for the four tickets to support the candidate, and the candidate received the desired amount of funding for their campaign. As such, the transaction is economically efficient. The fact that the price was high does not negate its efficiency as long as both parties agreed to it voluntarily.

Question 19

In economics, the term "equity" means
A)everyone has an equal standard of living.
B)the hardest working individuals consume all they want.
C)only elected officials have high standards of living.
D)economic benefits are distributed fairly.

Accepted Answer

In economics, the term "equity" means that economic benefits, such as income and resources, are distributed fairly among individuals and groups. This can involve balancing economic outcomes to ensure that everyone has opportunities to succeed, regardless of their starting point or circumstances. It is not about everyone having an equal standard of living or allowing the hardest working individuals to consume all they want. Elected officials also do not necessarily have higher standards of living based on the concept of equity.

Question 20

Which of the following is a result of a market economy?
A)environmental protection
B)an equal income distribution
C)agreement on equity
D)voluntary exchange

Accepted Answer

Voluntary exchange is a fundamental element of a market economy, where individuals and businesses are free to buy and sell goods and services without interference from the government. This freedom and choice lead to competition, innovation, and efficiency. However, it does not guarantee environmental protection or an equal income distribution, and there may not be agreement on equity among different individuals and groups.

Quiz 1: Economics: Foundations and Models

________ is a situation in which a good or service is produced at the lowest possible cost.

How are the fundamental economic decisions determined in North Korea?

Markets promote

All of the following contributed to the downfall of the Soviet Union in 1991 except

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

Which of the following is motivated by an equity concern?

Allocative efficiency is achieved when firms produce goods and services

Which of the following generates productive efficiency?

Who receives the most of what is produced in a market economy?

Why is it necessary for all economic systems to not only provide people with goods and services, but also restrict them from getting as much of these goods and services as they wish?

When production reflects consumer preferences, ________ occurs.

Which of the following is motivated by an efficiency concern?

Which of the following statements is true about competition in a market?

Productive efficiency is achieved when

Voluntary exchange between buyers and sellers generates ________ in a market economy.

How are the fundamental economic questions answered in a market economy?

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.

Political candidates often hold fund raisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Is this transaction economically efficient?

In economics, the term "equity" means

Which of the following is a result of a market economy?