Question 1

The idea that because of scarcity,producing more of one good or service means producing less of another good or service refers to the economic concept of
A) optimization.
B) efficiency.
C) trade-off.
D) equity.

Accepted Answer

The idea of producing more of one good or service means producing less of another is known as a trade-off. This is because resources are limited and cannot be used to produce an unlimited quantity of goods and services. Therefore, when more resources are allocated to produce one good or service, fewer resources are available to produce another good or service, creating a trade-off between the two. Option A, optimization, refers to choosing the best possible option among available alternatives. Option B, efficiency, relates to maximizing the output of goods and services using available resources. Option D, equity, refers to the fair distribution of resources and benefits among members of society. While all of these concepts are important in economics, only the concept of a trade-off applies to the given scenario.

Question 2

Which of the following is not an example of an economic trade-off that a firm has to make?
A) whether it is cheaper to produce with more machines or with more workers
B) whether it is to outsource the production of a good or service
C) whether or not consumers will buy its products
D) whether it should produce more of its product

Accepted Answer

The decision of whether or not consumers will buy the firm's product is not an example of an economic trade-off as it is not a decision that the firm can control or choose between. The other options all involve choosing between different ways of achieving the firm's goals or objectives, taking into account different costs and benefits.

Question 3

The three fundamental questions that any economy must address are
A) What will be the prices of goods and services; how will these goods and services be produced; and who will receive them?
B) What goods and services to produce; how will these goods and services be produced; and who receives them?
C) Who gets jobs; what wages do workers earn; and who owns what property?
D) How much will be saved; what will be produced; and how can these goods and services be fairly distributed?

Accepted Answer

The three fundamental questions of any economy are what goods and services to produce, how these goods and services will be produced, and who will receive them. Choice B accurately represents these three questions. Choices A, C, and D do not include all three fundamental questions or include irrelevant questions.

Question 4

Arlene quits her $125,000-a-year job to take care of her ailing parents.What is the opportunity cost of her decision?
A) zero, since she will no longer be earning a salary
B) It depends on the "going rate" for home-care providers.
C) at least $125,000
D) the value she attributes to the satisfaction she receives from taking care of her parents

Accepted Answer

The opportunity cost of Arlene's decision is at least $125,000 since she is giving up a salary of that amount. Opportunity cost refers to the cost of foregone opportunities, so the value she receives from taking care of her parents is not considered in this scenario.

Question 5

Which of the following statements about the economic decisions consumers,firms,and the government have to make is false?
A) Governments face the problem of scarcity in making economic decisions.
B) Only individuals face scarcity; firms and the government do not.
C) Both firms and individuals face scarcity.
D) Each faces the problem of scarcity which necessitates trade-offs in making economic decisions.

Accepted Answer

This statement is false. Firms and the government also face the problem of scarcity, as they have limited resources and must make trade-offs in their economic decisions.

Question 6

Which of the following statements is true?
A) Anytime you have to decide which action to take you are experiencing economic equity.
B) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale.
C) Every individual, no matter how rich or poor, is faced with making trade-offs.
D) Economics is a social science that studies the trade-offs we are forced to make because resources are unlimited.

Accepted Answer

Every individual, no matter how rich or poor, is faced with making trade-offs. This is because resources are limited and we have unlimited wants and needs. Therefore, we must prioritize and make choices about how to allocate our resources. Option A is incorrect because economic equity refers to fairness and equality in the distribution of resources, not decision-making. Option B is incorrect because trade-offs apply to any decision involving alternative uses of resources, regardless of supply levels. Option D is incorrect because economics studies how we allocate scarce resources among competing wants and needs, not unlimited resources.

Question 7

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each.What is the opportunity cost of buying a Russian tea cake?
A) 2 1/2 cappuccinos
B) 2/5 of a cappuccino
C) $2.50
D) $1.00

Accepted Answer

The opportunity cost of buying a Russian tea cake is the value of the best alternative that must be forgone. In this case, the best alternative is buying a cappuccino, which costs $2.50. Therefore, the opportunity cost of buying a Russian tea cake is equivalent to 2/5 of a cappuccino ($2.50 divided by the cost of one Russian tea cake, $1.00). Therefore, the best choice is to buy a Russian tea cake and forego 2/5 of a cappuccino.

Question 8

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each.What is the opportunity cost of buying a cappuccino?
A) 2 1/2 Russian tea cakes
B) 2/5 of a Russian tea cake
C) $2.50
D) $1.00

Accepted Answer

The opportunity cost of buying a cappuccino is the value of the next best alternative that is foregone, which in this case is the cost of buying Russian tea cakes. If one cappuccino costs $2.50 and one Russian tea cake costs $1.00, then the opportunity cost of buying a cappuccino is the number of Russian tea cakes that you could have purchased with $2.50. In this case, $2.50/$1.00 = 2.5, so you could purchase 2 whole Russian tea cakes and have $0.50 left over, or you could purchase 2 Russian tea cakes and 1/2 of another. Therefore, the opportunity cost of buying a cappuccino is 2 1/2 Russian tea cakes.

Question 9

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 10

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 11

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, those who are willing and able to buy goods and services receive the most of what is produced. This is because the price system determines who is able to afford the goods and services being produced, and those who can afford them are able to acquire them. This leads to an unequal distribution of resources and income, as those with higher incomes are able to purchase more goods and services than those with lower incomes.

Question 12

Consider the following economic agents: 
a.the government
b. consumers
c.producers
Who,in a centrally planned 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 centrally planned economy, the government decides what goods and services will be produced with the scarce resources available. Consumers and producers do not have a say in this decision-making process.

Question 13

Society faces a trade-off in all of the following situations except
A) when deciding who will receive the goods and services produced.
B) when deciding what goods and services will be produced.
C) when deciding how goods and services will be produced.
D) when some previously unemployed workers find jobs.

Accepted Answer

When some previously unemployed workers find jobs, there is no trade-off as it is a positive outcome for society. The other options (A, B, and C) all involve trade-offs as society must make choices with limited resources.

Question 14

The decision about what goods and services will be produced made in a market economy is made by
A) lawmakers in the government voting on what will be produced.
B) workers deciding to produce only what the boss says must be produced.
C) producers deciding what society wants most.
D) consumers and firms choosing which goods and services to buy or produce.
E) consumers dictating to firms what they need most.

Accepted Answer

In a market economy, producers will produce goods and services that they believe consumers will want and are willing to pay for. Consumers, in turn, choose which goods and services they want to purchase based on their own needs and preferences. This process of supply and demand helps determine what goods and services will be produced in a market economy.

Question 15

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, many would argue that the strong, centralized control of the economy by the Communist Party and Soviet government was one of the causes of the country's economic problems. The other options listed all contributed to the downfall of the Soviet Union, including public dissatisfaction with living standards and political repression, an inability to produce low-cost consumer goods, and a lack of high-quality goods and services.

Question 16

The distribution of income primarily determines which of the fundamental economic questions?
A) What goods and services are to be produced?
B) How the goods and services are to be produced?
C) Who will receive the goods and services produced?
D) How to plan the economy?

Accepted Answer

The distribution of income primarily determines who will receive the goods and services produced.

Question 17

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 operates under a centrally planned economy, meaning the government makes all fundamental economic decisions. There is no market interaction between individuals or firms.

Question 18

Automobile manufacturers produce a range of automobiles such as sports utility vehicles,luxury sedans,pickup trucks and compact cars.What fundamental economic question are they addressing by making this range of products?
A) How to produce goods that consumers want?
B) Why produce a variety of automobiles?
C) What to produce?
D) Who to produce automobiles for?

Accepted Answer

The answer of Automobile manufacturers produce a range of automobiles...

Question 19

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 20

The highest valued alternative that must be given up to engage in an activity is the definition of
A) economic equity.
B) marginal benefit.
C) opportunity cost.
D) marginal cost.

Accepted Answer

Opportunity cost is the highest valued alternative that must be given up to engage in an activity. This is the concept that helps individuals and businesses make informed decisions about resource allocation and investment.

Quiz 1: Economics: Foundations and Models

The idea that because of scarcity,producing more of one good or service means producing less of another good or service refers to the economic concept of

Which of the following is not an example of an economic trade-off that a firm has to make?

The three fundamental questions that any economy must address are

Arlene quits her $125,000-a-year job to take care of her ailing parents.What is the opportunity cost of her decision?

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

Which of the following statements is true?

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each.What is the opportunity cost of buying a Russian tea cake?

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each.What is the opportunity cost of buying a cappuccino?

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

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?

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

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

Society faces a trade-off in all of the following situations except

The decision about what goods and services will be produced made in a market economy is made by

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

The distribution of income primarily determines which of the fundamental economic questions?

How are the fundamental economic decisions determined in North Korea?

Automobile manufacturers produce a range of automobiles such as sports utility vehicles,luxury sedans,pickup trucks and compact cars.What fundamental economic question are they addressing by making this range of products?

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

The highest valued alternative that must be given up to engage in an activity is the definition of