Question 1

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" refers to the fair distribution of economic benefits. This means that everyone gets a fair share of the resources, goods or services that are available, based on their needs, abilities, and efforts. It is not about everyone having an equal standard of living or only elected officials having high standards of living. Additionally, it is not about the hardest working individuals consuming all they want, as this would lead to an unequal distribution of resources.

Question 2

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 resources are allocated in a way that maximizes the overall benefit to society. This means that the last unit produced provides a marginal benefit to society that is equal to the marginal cost of producing it. At this point, any additional units produced would provide less benefit than their cost, leading to inefficiency. Therefore, option A is the correct answer.

Question 3

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

Allocating resources based on preventing more infections per dollar will prioritize efficiency, but it may mean that some populations are left without any prevention services, which could potentially create an equity issue. This is an example of an efficiency-equity trade-off.

B, C, and D do not involve a trade-off between efficiency and equity. B is an attempt to increase birth rates, C is about recruiting students for specific programs, and D is about providing free admission to local residents for art museums.

Question 4

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 are mainly made by consumers and producers. Consumers make decisions about what they want to buy and producers make decisions about what to produce based on consumer demand and profitability. While the government may influence the production of certain goods through policies and regulations, they do not typically have complete control over what is produced in a market economy.

Question 5

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, meaning that a single entity or group of individuals - such as the government - has controlled all aspects of economic production and distribution. This is in contrast to market economies, which rely on supply and demand to determine prices and allocate resources. While some centrally planned economies may have moved towards a mixed economic system over time, their origins are rooted in authoritarian control.

Question 6

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 proposal to favor young patients over old in organ allocation is motivated by an efficiency concern, as it seeks to maximize the number of years of life saved by donated organs.

Question 7

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 allows for resources to be allocated efficiently based on supply and demand in the market. This leads to allocative efficiency, where resources are allocated to their highest valued and most desired use.

Question 8

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 9

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 both the buyer and seller would only agree to a trade if they both benefit. This is because the buyer values the good more than the money they are giving up and the seller values the money more than the good they are giving up. Therefore, there is a mutual benefit for both parties, leading to economic efficiency.

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

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 hallmark of a market economy, as buyers and sellers freely engage in transactions based on their own self-interest. Environmental protection and equal income distribution may be desired outcomes, but they are not necessarily guaranteed in a market economy. Agreement on equity is also not a guaranteed outcome, as individuals may have differing opinions on what is fair or equitable.

Question 12

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 13

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 productive output and minimizing costs, which can result in unequal distribution of resources and income. Economic equity, on the other hand, seeks to ensure fairness and equality in the distribution of resources and income, which may lead to decreased efficiency in some cases. Therefore, there is often a trade-off between economic efficiency and economic equity.

Question 14

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, the decision of what goods and services will be produced is influenced by all three groups mentioned (producers, consumers, and government). Producers look to maximize profits and may produce goods and services that they believe will sell well in the market. Consumers express their preferences through their purchasing decisions, which can influence what producers choose to produce. And the government can intervene through policies, regulations, and incentives to promote or discourage the production of certain goods and services. Therefore, all of the above have an impact on what goods and services are produced in a modern mixed economy.

Question 15

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

This transaction is a voluntary exchange wherein Wendy chose to purchase four tickets to the fundraiser for $1,000 per plate dinner. She willingly paid the price and supported the candidate's campaign, while the candidate raised funds for their campaign. Both parties benefited from the transaction, making it a win-win situation.

Question 16

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 goal of investing in companies that produce goods and services at the lowest possible cost indicates that he is looking for companies that are productively efficient. This means that these companies are able to produce goods and services at the lowest possible cost, given the technology and resources available to them. This efficiency can lead to lower prices for consumers and higher profits for the company. However, being productively efficient does not guarantee allocative efficiency or a guaranteed profit. Allocative efficiency refers to the production of goods and services that are most wanted by consumers, and a guaranteed profit is never a certainty in the investment world.

Question 17

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 18

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 to increase benefits for lower-income families would be motivated by an equity concern, as it seeks to provide resources and support to those who may be struggling financially.

Question 19

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

Mr. Peabody is investing in companies that produce goods and services based on consumer preferences, which indicates that he is seeking allocative efficiency. This means that he wants the market to allocate resources to the production of goods and services that consumers want the most. This is because allocative efficiency ensures that resources are used to produce the goods and services that provide the highest level of satisfaction to consumers.

Question 20

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 value of the highest foregone alternative, which is his $80,000-a-year job. Therefore, the opportunity cost is at least $80,000.

Quiz 1: Economics: Foundations and Models

In economics,the term "equity" means

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

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

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?

All centrally planned economies

Which of the following is motivated by an efficiency concern?

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

Allocative efficiency best explains ,and productive efficiency best explains .

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

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

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

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?

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

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

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?

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

How are most fundamental economic decisions now determined in China?

Which of the following is motivated by an equity concern?

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

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?