Question 1

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 has a centrally planned economy, which means that the government determines the fundamental economic decisions.

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 largely determines who receives the goods and services produced in the United States. If income is distributed more equally, then more people will have the means to purchase goods and services. If income is concentrated among a small percentage of the population, then a larger proportion of goods and services will be consumed by this group.

Question 3

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

Economic systems need to provide people with goods and services to meet their basic needs and wants. However, if people are allowed to consume unlimited amounts of goods and services, resources will be depleted and the production of certain goods and services will become less efficient. By restricting the consumption of goods and services, economic systems can ensure that resources are used efficiently and that the goods and services produced are the most highly valued by consumers. Thus, choice A is the best option as it correctly identifies the need for restrictions to maintain efficiency and the potential for some goods and services to be less highly valued than others.

Question 4

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 5

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, which means income is a limiting factor. Those who cannot afford to pay for certain products or services are unable to acquire them, preventing them from obtaining as many goods and services as they wish. Government interference, firm pricing, and taxation may affect the market mechanism, but the fundamental principle of a market system is that individuals can only get goods and services if they are able to pay for them.

Question 6

Which of the following is a problem inherent in centrally planned economies?
A)There are no problems and everyone,including consumers,is satisfied.
B)There is too much production of low-cost,high-quality goods and services.
C)Production managers are more concerned with satisfying government's orders than with satisfying consumer wants.
D)Unemployment is too high.

Accepted Answer

In centrally planned economies, production managers are responsible for meeting government orders, which often leads to a lack of interest in satisfying consumer wants. This can result in a shortage of goods that consumers actually want and an oversupply of goods that the government deems necessary, making the market inefficient.

Question 7

Competition forces firms to produce and sell products as long as the ________ to consumers exceeds the ________ of production.
A)marginal benefit; marginal cost
B)marginal benefit; marginal benefit
C)marginal cost; marginal cost
D)marginal cost; marginal benefit

Accepted Answer

Competition incentivizes firms to only produce and sell products if the additional benefit to consumers (marginal benefit) exceeds the additional cost of producing it (marginal cost). Therefore, choice A correctly identifies the relationship between marginal benefit and marginal cost in the context of competition.

Question 8

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

Scarcity is the fundamental problem of economics, and it affects all three types of economic decision-makers: consumers, firms, and government. Scarcity means that there are limited resources to satisfy unlimited wants and needs. As a result, every economic decision involves trade-offs, as the decision-maker must choose what to prioritize and what to forego. Therefore, D is the correct answer. A, B, and C are all incorrect because they do not acknowledge the universality of scarcity as a fundamental concept in economics.

Question 9

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. Opportunity cost is the cost of the next best alternative forgone while making a decision. With the availability of Karaoke at Kerrie's, customers now have an additional option, and some may prefer to go there instead of playing skeeball. Therefore, the opportunity cost of playing skeeball at Skeeter's has increased, as now customers have to give up the opportunity to do Karaoke at Kerrie's when they decide to play skeeball at Skeeter's.

Question 10

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, the allocation of resources and distribution of goods and services is primarily determined by the law of supply and demand. Those who are willing and able to pay the market price for a good or service will tend to receive the most of what is produced, as producers will prioritize fulfilling the orders of customers who are willing to pay the most. This is why people with higher incomes or greater purchasing power tend to have greater access to goods and services in a market economy.

Question 11

In a market economy,________ interact in markets to decide the answers to the fundamental economic questions.
A)state and local governments
B)large corporations
C)households and firms
D)the judicial and legislative branches of the federal government

Accepted Answer

In a market economy, households and firms are the main actors who interact in markets to determine what goods and services are produced, how they are produced, and for whom they are produced. This system is based on the principles of supply and demand, where firms supply goods and services in response to the demand from households, who in turn provide the necessary income for firms to continue producing. While state and local governments, large corporations, and the judicial and legislative branches of the federal government can play a role in regulating the market, it is ultimately the interactions between households and firms that determine the functioning of the economy.

Question 12

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, the decisions are made by both consumers and producers. Consumers decide what goods and services they want to purchase by using their purchasing power to signal to producers what is in demand. Producers then evaluate this demand and decide what goods and services to produce in order to meet consumer demand and make a profit. This process is driven by the forces of supply and demand in the market, rather than by government intervention or control.

Question 13

Productive efficiency is achieved when firms produce goods and services
A)most desired by society.
B)at the highest profit margin.
C)at the lowest cost.
D)of the highest quality.

Accepted Answer

Productive efficiency is achieved when firms produce goods and services at the lowest cost possible. This means that they are able to produce a given output using the minimum amount of resources, such as labor, materials, and energy. By achieving productive efficiency, firms are able to optimize their production processes, minimize waste, and stay competitive in the market. While producing goods and services that are popular with consumers, offering high profit margins, or of high quality are all important factors for firms, none of these factors guarantee productive efficiency.

Question 14

Allocative efficiency is achieved when
A)goods and services are fairly distributed among consumers in an economy.
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

Allocative efficiency occurs when resources are allocated in a way that maximizes consumer satisfaction, or in other words, when firms produce goods and services that consumers value most. This means that resources are not being wasted on producing goods and services that are not in demand, or producing goods and services at a higher cost than necessary. Allocative efficiency does not guarantee a fair distribution of goods and services, nor does it ensure there are no shortages or surpluses in the market.

Question 15

Which of the following contributes to the efficiency of markets?
A)Governments play an active role in the day-to-day operations of markets.
B)Markets are able to bring about an equitable distribution of goods and services.
C)Markets promote equal standards of living.
D)Markets promote competition and voluntary exchange.

Accepted Answer

Markets promote competition and voluntary exchange, which results in the efficient allocation of resources, lower prices, and increased innovation. Governments playing an active role in the day-to-day operations of markets can often lead to inefficiencies and distortions. Equitable distribution of goods and services and equal standards of living are not necessarily indicative of market efficiency.

Question 16

Voluntary exchange increases economic efficiency
A)because neither the buyer nor the seller would agree to a trade unless they both benefit.
B)because voluntary exchange only takes place with government permission.
C)because it is free and consequently does not cost anything.
D)because it allows wealthy individuals to act altruistically and give to the poor.

Accepted Answer

Voluntary exchange only occurs when both the buyer and seller perceive that they will benefit from the transaction. This creates a more efficient allocation of resources because goods and services are allocated to those who value them the most. This is known as the principle of mutual gain, and it is the foundation of voluntary exchange.

Question 17

When goods and services are produced at the lowest possible cost,________ occurs.
A)allocative efficiency
B)productive efficiency
C)equity
D)efficient central planning

Accepted Answer

Productive efficiency occurs when goods and services are produced at the lowest possible cost, meaning that no resources are wasted in the production process. This allows for the maximum output of goods and services to be produced with the available resources. Allocative efficiency, on the other hand, refers to the efficient allocation of resources to produce the goods and services that society demands. Equity refers to fairness and justice in the distribution of resources and outcomes. "Efficient central planning" is not a commonly used economic term and does not accurately describe a specific concept.

Question 18

Which of the following contributed to the downfall of the Soviet Union in 1991?
A)public dissatisfaction with low living standards and political repression
B)producing higher-quality goods than were desired by consumers
C)the rapidly increasing standard of living
D)the lack of a strong dictator who could coordinate economic activities

Accepted Answer

The Soviet Union faced public dissatisfaction with low living standards and political repression, which ultimately contributed to its downfall in 1991. People were unhappy with the poor quality of life, lack of basic goods, and limited freedom of expression under the Soviet regime. This led to widespread protests and eventually to the collapse of the Soviet Union. The other options are incorrect because the Soviet Union did not produce higher-quality goods than were desired by consumers, the standard of living was not rapidly increasing, and the lack of a strong dictator was not the primary cause of its downfall.

Question 19

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,________ occurs.
A)allocative efficiency
B)productive efficiency
C)equity
D)efficient central planning

Accepted Answer

Allocative efficiency occurs when resources are allocated in the most efficient way possible, meaning that there is no waste in production and all goods and services are produced up to the point where the marginal benefit equals the marginal cost. This results in an optimal distribution of resources and maximizes social welfare.

Question 20

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.

Quiz 1: Economics: Foundations and Models

How are the fundamental economic decisions determined in Cuba?

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

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 .

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?

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

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

Competition forces firms to produce and sell products as long as the to consumers exceeds the of production.

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

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

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

In a market economy,________ interact in markets to decide the answers to the fundamental economic questions.

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

Productive efficiency is achieved when firms produce goods and services

Allocative efficiency is achieved when

Which of the following contributes to the efficiency of markets?

Voluntary exchange increases economic efficiency

When goods and services are produced at the lowest possible cost,________ occurs.

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

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,________ occurs.

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?