Question 1

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 opportunity cost of buying a goldfish is the alternative that must be given up, which is the value of what could have been gained by choosing the next best alternative. In this case, the next best alternative is to buy an angelfish, which costs $10. Therefore, the opportunity cost of buying a goldfish is the value of one angelfish, which is $10 divided by the cost of a goldfish ($2), equaling 5 angelfish. Therefore, the best choice is option B, which correctly identifies the opportunity cost as 1/5 of an angelfish.

Question 2

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?
A) No, political candidates should never be allowed to overcharge for a fundraising dinner as that limits the number of people who can afford to attend.
B) Yes, it was a voluntary exchange that benefited both parties.
C) No, Wendy paid too much for four dinners.
D) Yes, but only if the dinners served actually cost $1,000 each.

Accepted Answer

The transaction between Wendy and the political candidate was voluntary, meaning both parties agreed to the terms of the exchange. Wendy chose to purchase four tickets at $1,000 per plate because she believed it was a worthy cause or because she supported the candidate. Meanwhile, the candidate received funds for their campaign. Hence, it was a beneficial exchange for both parties.

Question 3

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 of goods and services between buyers and sellers based on supply and demand. Therefore, the result of a market economy is voluntary exchange, which is the only option given in the list. Environmental protection, equal income distribution, and agreement on equity may or may not be outcomes of a market economy, as they depend on other factors such as government regulations and social policies.

Question 4

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 refers to using resources in the most productive way possible while economic equity refers to the fair distribution of resources. In some cases, achieving economic efficiency may mean sacrificing economic equity and vice versa. For example, a free market economy may be highly efficient but may not distribute resources fairly. On the other hand, a highly regulated economy that aims to distribute resources equally may not be as efficient. Therefore, there is often a trade-off between economic efficiency and economic equity.

Question 5

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, as it seeks to maximize the use of donated organs and save more lives.

Question 6

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 determine the most efficient allocation of resources through market prices, resulting in allocative efficiency. Scarcity is a fact of life in all economies, not just market economies. Productive efficiency and equity are not necessarily generated through voluntary exchange, but can be influenced by government policies and regulations.

Question 7

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, what goods and services will be produced with the scarce resources available are decided by both consumers and producers. Consumers make their choices based on their needs and wants, and producers respond to those choices by producing the goods and services that are most in demand. The government may also have some influence through regulations and taxes, but ultimately it is the decisions of consumers and producers that determine the allocation of resources in a market economy.

Question 8

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) producers, consumers, and government

Accepted Answer

In a modern mixed economy, the decisions about what goods and services will be produced are made by a combination of producers, consumers, and government. Producers decide what to produce based on market demand and profitability, consumers influence what is produced by expressing their preferences through their purchasing decisions, and the government can have a role in regulating certain industries or providing funding for certain types of goods and services. Therefore, all three entities have a hand in determining what is produced in the economy.

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 is the value of the next best alternative that Trinh gave up in order to become a full-time volunteer at the museum. In this case, the next best alternative was his $80,000-a-year job, so the opportunity cost is at least $80,000.

Question 10

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 allocation of resources for HIV-prevention involves a trade-off between efficiency (preventing more infections per dollar) and equity (ensuring all populations have access to prevention services). By allocating resources based on reported AIDS cases, some populations may be left without any prevention services, thus leading to an equity concern. Pursuing an efficiency-based allocation strategy may also result in a reduction in the allocation of resources to certain states, leading to further equity concerns.

Question 11

________ 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 encourages firms to constantly seek ways to lower their costs of production in order to offer goods and services at a lower price, or to differentiate their products from their competitors. This leads to a more efficient allocation of resources as resources are directed towards the goods and services that are most valuable to consumers, and away from those that are less valuable. In a competitive market, firms that cannot produce goods and services at a reasonable cost will be driven out of business, which further increases efficiency.

Question 12

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 incentivizes them to reduce costs and improve efficiency in order to lower prices and attract buyers.

Question 13

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

Transferring funds to food bank programs in order to increase benefits to lower-income families is motivated by an equity concern as it aims to provide assistance to those who are in need and may be at a disadvantage due to their lower income status.

Question 14

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 15

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 refers to the distribution of economic benefits or resources in a fair and just manner. This means that everyone is given an opportunity to access resources and benefits, regardless of their socioeconomic status or position in society. It aims to create a level playing field for all members of society and reduce inequalities.

Question 16

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

Allocative efficiency relates to the question of "what" should be produced, while productive efficiency concerns the question of "how" goods and services can be produced in the most efficient manner possible.

Question 17

Which of the following statements about competition in a market is true?
A) Competition forces firms to outsource 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 the market forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production. This is because firms need to ensure that they are generating enough revenue to cover their costs and make a profit in a competitive market. Out of the given options, this is the most accurate statement about competition in a market.

Question 18

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 the last unit produced provides a marginal benefit to society equal to the marginal cost of producing it. This means that resources are being used in the most efficient way possible, maximizing overall well-being.

Question 19

How are most fundamental economic decisions now 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 most fundamental economic decisions now...

Question 20

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 and voluntary exchange, as buyers and sellers come together to trade goods and services based on prices set by the market. While markets do not necessarily promote equity or equality, they do provide opportunities for individuals to negotiate mutually beneficial transactions and operate on a level playing field.

Quiz 1: Economics: Foundations and Models

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

Political candidates often hold fundraisers by charging "per plate" for dinner.Wendy purchased four tickets to a $1,000 per plate dinner for a local city council candidate.Does this transaction benefit both parties?

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

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

Which of the following is motivated by an efficiency concern?

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

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?

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

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?

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

________ 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.

Which of the following generates productive efficiency?

Which of the following is motivated by an equity concern?

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?

In economics,the term "equity" means

Allocative efficiency best explains ,and productive efficiency best explains .

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

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

How are most fundamental economic decisions now determined in China?

Markets promote