Question 1

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

Accepted Answer

The answer of How are the fundamental economic decisions determined...

Question 2

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 allows buyers and sellers to allocate resources efficiently because they are able to freely negotiate prices and quantity demanded/supplied based on their preferences and limitations. This allocative efficiency ensures that resources are directed to the production of goods and services that are most valued by society.

Question 3

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

This is a voluntary exchange between Wendy and the political candidate, both parties benefited from the transaction. The fact that Wendy was willing to pay $4,000 for four tickets shows that she valued attending the dinner more than having $4,000 in cash. Therefore, this exchange is economically efficient.

Question 4

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

Accepted Answer

In a modern mixed economy, what goods and services will be produced is determined by a combination of producers, consumers, and the government. Producers determine what to produce based on market demand and profitability, consumers determine what to buy based on their needs and preferences, and the government influences the economy through regulations, subsidies, and public goods and services. Therefore, all of the above are involved in the decision-making process.

Question 5

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

Equity in economics means that benefits are distributed fairly. This can include fair wages, equal opportunities, and access to resources and services. It recognizes that different individuals and groups may have different needs and starting points, and seeks to ensure that everyone has a fair chance at economic success and well-being.

Question 6

Mr.Peabody chooses to invest in companies that produce goods and services based on consumer preferences.Mr.Peabody is investing in companies that are attempting to be
A)allocatively efficient.
B)productively efficient.
C)guaranteed to make a profit.
D)all of the above

Accepted Answer

By investing in companies that produce goods and services based on consumer preferences, Mr. Peabody is likely investing in firms that are allocatively efficient, meaning they are producing goods and services that meet consumer demand and are valued by consumers. This does not necessarily guarantee that the companies will be productively efficient or profitable, as there may be other factors that affect their success.

Question 7

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

A market economy is characterized by voluntary exchange, where individuals and businesses freely trade goods and services based on supply and demand. This means that transactions are made without force or coercion, and both parties involved in the exchange benefit in some way. In a market economy, there is no guarantee of equal income distribution or agreement on equity. While environmental protection may be a result of market forces (such as consumer demand for eco-friendly products), it is not a defining characteristic of a market economy.

Question 8

Which of the following is motivated by an efficiency concern?
A)In December 2006, the Bush administration restarted a short-term housing assistance program for victims of Hurricane Katrina.
B)Each year, the University of Notre Dame conducts a lottery to parcel out the 30,000 seats available to contributors, former athletes and parents in the 80,000-seat stadium.
C)The United Network for Organ Sharing advocates a system of 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's housing choice voucher program assists very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market.

Accepted Answer

The United Network for Organ Sharing's advocacy for a system of rationing scarce kidneys that would favor young patients over old is motivated by an efficiency concern - to increase the lifespan of donated organs by giving them to patients who are likely to live longer after receiving them.

Question 9

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum.What is the opportunity cost of his decision?
A)0 since he will no longer be earning a salary
B)depends on the "going rate" of museum employees
C)at least $80,000
D)the value he attributes to the joy of working at a museum

Accepted Answer

The opportunity cost of Trinh's decision is the highest valued alternative that he gave up by quitting his job. In this case, it is the salary he was earning, which is at least $80,000.

Question 10

Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each.What is the opportunity cost of buying a goldfish?
A)5 angelfish
B)1/5 of an angelfish
C)$10
D)$2

Accepted Answer

The answer of Trina's Tropical Fish Store sells goldfish for...

Question 11

Jewelry manufacturers produce a range of products such as rings,necklaces,bracelets,and brooches.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 items?
C)What to produce?
D)Who to produce the items for?

Accepted Answer

By offering a range of products such as rings, necklaces, bracelets, and brooches, jewelry manufacturers are addressing the fundamental economic question of "what to produce?" They are deciding on the mix of products to offer in order to meet consumer demand and maximize profits.

Question 12

Mr.Peabody chooses to invest in companies that produce goods and services at the lowest possible cost.Mr.Peabody is investing in companies that are
A)allocatively efficient.
B)productively efficient.
C)guaranteed to make a profit.
D)all of the above

Accepted Answer

Mr. Peabody's investment strategy of choosing companies that produce goods and services at the lowest possible cost indicates that he is investing in companies that are productively efficient, meaning they are able to produce output at the lowest cost possible. However, there is no indication that Mr. Peabody is considering allocative efficiency or guaranteed profits, so options A, C, and D are not applicable.

Question 13

Voluntary exchange ________ economic efficiency because neither the buyer nor the seller would agree to a trade unless ________.
A)increases; they both benefit
B)increases; only one party benefits
C)decreases; neither benefit
D)decreases; they both benefit

Accepted Answer

Voluntary exchange increases economic efficiency because it results in a mutually beneficial outcome for both the buyer and the seller. If either party did not benefit from the trade, they would choose not to participate, and therefore, the trade would not have occurred. Therefore, voluntary exchange leads to an increase in economic efficiency by ensuring that resources are allocated to their highest-valued uses.

Question 14

Which of the following is 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)Some U.S.colleges are actively recruiting foreign students for their technology-based programs.
D)All New York City art museums are considering adopting a free-admission policy for local residents one weekend per month.

Accepted Answer

The article by Edward Kaplan and Michael Merson of Yale University School of Medicine proposes a way of allocating HIV-prevention resources that balances the efficiency of preventing more infections per dollar with the equity of providing prevention services to all populations, even if it means some receive less effective combinations of programs. This is an example of an efficiency-equity trade-off faced by economic agents. Choices B, C, and D do not involve such a trade-off.

Question 15

When every good or service is produced up to the point where the last unit provides ________,allocative efficiency occurs.
A)a marginal benefit to society equal to the marginal cost of producing it
B)a marginal benefit to society greater than the marginal cost of producing it
C)a marginal benefit to society less than the marginal cost of producing it
D)a marginal benefit to society equal to zero

Accepted Answer

Allocative efficiency occurs when there is no other possible allocation of resources that would produce more net benefit. This happens 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. This ensures that resources are being used efficiently and that society is getting the maximum benefit from the goods and services being produced.

Question 16

Which of the following correctly describes the relationship between economic efficiency and economic equity?
A)They are both automatically achieved in a free market economy.
B)They always call for opposite outcomes.
C)There is no conflict between the two goals.
D)There is often a trade-off between the two.

Accepted Answer

Economic efficiency often involves maximizing productivity and minimizing costs, which can result in unequal distributions of income and resources. Economic equity, on the other hand, aims for fairness and equal distribution of resources among individuals. Therefore, there is often a trade-off between the two goals as achieving one may come at the expense of the other.

Question 17

All centrally planned economies
A)have been political dictatorships.
B)started out as market economies.
C)began as mixed economies.
D)have become mixed economies.

Accepted Answer

All centrally planned economies have been political dictatorships, with the government controlling all economic decisions and resources. This is due to the fact that a planned economy requires a high degree of centralization and control, which is most efficiently achieved through a dictatorship or authoritarian regime.

Question 18

Allocative efficiency best explains ________,and productive efficiency best explains ________.
A)how something will be produced; when something will be produced
B)when something will be produced; why something will be produced
C)why something will be produced; what will be produced
D)what will be produced; how something will be produced

Accepted Answer

The answer of Allocative efficiency best explains ________,and productive efficiency...

Question 19

Which of the following is motivated by an equity concern?
A)Some states 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 California.
C)The United Network for Organ Sharing advocates a system of rationing scarce kidneys that would favor young patients over old in an effort to wring more life out of donated organs.
D)The United States offers patent protection to pharmaceutical manufacturers to prevent others from duplicating their products.

Accepted Answer

The transfer of funds to food bank programs in order to increase benefits to lower-income families is motivated by an equity concern. This action aims to address and reduce the inequality in access to food assistance for different income groups.

Question 20

Consider the following economic agents:
a.the government
b.consumers
c.producers
Who,in a market 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 market economy, the decisions about what goods and services will be produced with the scarce resources available are largely based on the preferences and choices of both consumers and producers. Consumers express their preferences through their purchases and demand for goods and services, while producers respond by producing the goods and services that will generate the most profit. Thus, the market system is driven by the interactions between consumers and producers, with very little direct involvement from the government.

Quiz 1: Economics: Foundations and Models

How are the fundamental economic decisions determined in China?

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

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 a modern mixed economy,who decides what goods and services will be produced?

In economics,the term "equity" means

Mr.Peabody chooses to invest in companies that produce goods and services based on consumer preferences.Mr.Peabody is investing in companies that are attempting to be

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

Which of the following is motivated by an efficiency concern?

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum.What is the opportunity cost of his decision?

Trina's Tropical Fish Store sells goldfish for $2 each and angelfish for $10 each.What is the opportunity cost of buying a goldfish?

Jewelry manufacturers produce a range of products such as rings,necklaces,bracelets,and brooches.What fundamental economic question are they addressing by offering this range of items?

Mr.Peabody chooses to invest in companies that produce goods and services at the lowest possible cost.Mr.Peabody is investing in companies that are

Voluntary exchange economic efficiency because neither the buyer nor the seller would agree to a trade unless .

Which of the following is an example of an efficiency-equity trade-off faced by economic agents?

When every good or service is produced up to the point where the last unit provides ________,allocative efficiency occurs.

Which of the following correctly describes the relationship between economic efficiency and economic equity?

All centrally planned economies

Allocative efficiency best explains ,and productive efficiency best explains .

Which of the following is motivated by an equity concern?

Consider the following economic agents: a.the government b.consumers c.producers Who,in a market economy,decides what goods and services will be produced with the scarce resources available in that economy?