Question 1

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 both parties benefited from it. Wendy was willing to pay $4,000 for the four tickets to the fundraiser, and the candidate received the funds they needed for their campaign. Therefore, this transaction is economically efficient. The fact that the price is high does not mean it is not efficient. In a market economy, the price reflects the supply and demand of a good or service.

Question 2

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 who can coordinate economic activities did not contribute to the downfall of the Soviet Union. In fact, the strong centralization of power under Communist Party leadership was a contributing factor to the Soviet Union's demise. The other choices all played a role in the country's downfall.

Question 3

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 allocated in a way that maximizes consumer satisfaction. This results in the production of goods that consumers want and are willing to pay for, leading to an efficient use of resources.

Question 4

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 5

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. This means that they are utilizing their resources and technology in the most efficient way possible to minimize production costs. When firms achieve productive efficiency, they are able to offer lower prices to consumers, which can result in more sales and profits.

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 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. The idea behind this is to maximize the benefit of the limited number of organs available by giving them to patients who will live longer with them.

Question 7

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 8

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 produce goods and services that consumers value most. This means that resources are being allocated in the most efficient way possible, resulting in maximum satisfaction for consumers.

Question 9

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

Question 10

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 by allowing buyers and sellers to freely negotiate prices and goods/services exchanged. They also promote voluntary exchange by allowing individuals to make their own choices about what goods/services to buy or sell. While markets can potentially lead to inequality, they do not necessarily promote equity or equality.

Question 11

________ 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 means that a good or service is produced at the lowest possible cost, which means that resources are being used in the most efficient way possible. This also ensures that the goods and services produced are more affordable for consumers. Allocative efficiency, on the other hand, is the situation where resources are allocated in a way that maximizes social welfare or consumer satisfaction. Equity is the concept of fairness and equality, while optimal marginalism involves finding the point where the marginal benefits equal the marginal costs.

Question 12

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 make their purchasing decisions based on their own self-interest. This encourages competition among producers to offer better goods and services at lower prices. As a result, the economy grows, which in turn increases employment, incomes, and standard of living. Thus, the main result of a market economy is voluntary exchange.

Question 13

Which of the following statements is true about competition in a market?
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 a market forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production, ensuring that resources are allocated efficiently and productively. This creates a situation where consumers have access to a variety of products at competitive prices, which benefits them. A, B, and D are not necessarily true or applicable to all markets.

Question 14

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 leads to lower prices and better quality products, which promote productive efficiency. Competition among buyers, government inspectors, and government production rules and regulations may contribute to other aspects of efficiency, but not necessarily productive efficiency.

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 leads to allocative efficiency in a market economy. Allocative efficiency is when resources are allocated to their most valued uses based on consumer preferences and market demand. This helps to maximize societal welfare by ensuring that goods and services are produced and distributed in a manner that benefits society the most.

Question 16

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 17

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 fairness and impartiality in distributing economic benefits, resources and opportunities among different members of society. It ensures that the distribution of wealth and income is fair and just, so that everyone has a basic standard of living, regardless of their background, income, or social status. Therefore, option D is the most appropriate choice. Options A, B, and C are incorrect because they do not reflect the concept of equity in economics.

Question 18

________ 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 produce efficiently and at a lower cost in order to offer goods and services at lower prices or differentiate their products from their competitors. This creates a more efficient allocation of resources as goods and services are produced at their lowest cost and highest value, leading to greater benefits for both consumers and producers. In contrast, a centrally planned economy may suffer from inefficiencies as decisions are made by a centralized authority without information about the preferences and needs of consumers and producers.

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

Transferring funds to food bank programs in order to increase benefits to lower-income families is motivated by an equity concern. This is because it aims to address the inequality in access to food resources and provide support to those who may not have the financial means to access adequate nutrition.

Question 20

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, goods and services are distributed based on the principle of supply and demand. Those who are willing and able to pay the market price of a good or service receive it, regardless of their income level. This means that the people who earn higher incomes may be able to afford more goods and services, but they do not necessarily receive a larger share of what is produced. Therefore, the answer is B.

Quiz 1: Economics: Foundations and Models

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?

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

When production reflects consumer preferences,________ occurs.

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?

Productive efficiency is achieved when

Which of the following is motivated by an efficiency concern?

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

Allocative efficiency is achieved when firms produce goods and services

How are the fundamental economic decisions determined in North Korea?

Markets promote

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

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

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

Which of the following generates productive efficiency?

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

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

In economics,the term "equity" means

________ 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 is motivated by an equity concern?

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