question
Relative to a market economy, a centrally planned economy would be expected to be
answer
Better at neither productive efficiency nor allocative efficiency because the absence of market imposed competition negates the needs of firms to satisfy consumer wants or produce using lowest-cost methods
question
Consider the following, which are incentives:
a. lower priced gas
b. less costly
c. produce more of DVDs
a. lower priced gas
b. less costly
c. produce more of DVDs
answer
a, b, and c
question
Productive efficiency is
answer
lowest possible cost
question
Allocative efficiency is
answer
every good or service produced to a point where the marginal benefit is equal to the marginal cost
question
Opportunity cost
answer
highest valued alternative that must be given up
question
Which of the following is NOT a step to develop an economic model?
a. decide on assumptions
b. use economic data
c. formulate testable hypothesis
d. make value judgements to be proven or not
e. revise model if it fails to prove
a. decide on assumptions
b. use economic data
c. formulate testable hypothesis
d. make value judgements to be proven or not
e. revise model if it fails to prove
answer
d. make value judgements to be proven or not
question
What are the 3 economic questions to be answered?
answer
What goods will be produced
How will they be produced
Who will receive the goods
How will they be produced
Who will receive the goods
question
In centrally planned economics, decisions are made by the ________, while in market economics, decisions are made by ________
answer
government, households & firms
question
A ________ results from actions of buyers and sellers where government plays a SIGNIFICANT role in allocation of resources
answer
mixed economy
question
Marginal (extra or additional) optimal decisions occur when
answer
Marginal Benefit = Marginal Cost
question
In economics, choices must be made because we live in a world of
answer
scarcity
question
Which of the following is true about scarcity?
answer
Scarcity refers to the situation in which unlimited wants exceed limited resources
question
the basic economic problem of ______ has always existed and will continue to exist
answer
scarcity
question
By definition, economics is the study of
answer
the choices people make to attain their goals, given their scarce resources
question
An economic ______ is a simplified version of some aspect of economic life used to analyze an economic issue
answer
model
question
Economists assume that individuals
answer
are rational and respond to incentives
question
Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ______, meaning they make the best decisions given their knowledge of the costs and benefits
answer
rationally
question
Economists reason that the optimal decision is to continue any activity up to the point where the
answer
marginal benefit equals the marginal cost
question
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
answer
trade-off
question
Which of the following is a problem inherent in centrally planned economies?
answer
There is too little production of low cost, high quality goods and services
question
Markets promote
answer
competition and voluntary exchange
question
In economics, the term 'equity' means
answer
economic benefits are distributed fairly
question
Which of the following correctly describes the relationship between economic efficiency and economic equity?
answer
There is no conflict between the two goals
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