Economic systems
Comparative and absolute advantage
Allocative and Productive efficiency
Cost benefit analysis
Miscellaneous terms
100
In a command economy, the government primarily allocates resources through:
(a) Profit maximization (b) Consumer choice (c) Central planning (d) Market forces
(c) Central planning
100
What is the definition of absolute advantage?
Absolute advantage is the ability to produce more with the available number of resources
100
What is productive efficiency?
Productive efficiency is who can create a product with the smallest or least opportunity cost
100
What is the law of diminishing marginal utility?
The more unit that are consumed, the more marginal utility will decrease
100
What are normative economics?
economic ideology that includes value jedgements
200
Which of the following economic systems is characterized by private ownership of the means of production, limited government intervention, and reliance on markets to allocate resources?
(a) Traditional economy (b) Command economy (c) Mixed economy (d) Market economy
(d) Market economy
200
If country A can produce 50 jets and county B can produce 40 jets, who has the absolute advantage?
Country A
200
Where on a PPC is the graph productively efficient?
Anywhere on the line
200
What is opportunity cost?
The cost of the next beat alternative
200
What are the 4 factors of production?
Land,labor,physical capital,human capital
300
In a traditional economy, what is the primary factor driving resource allocation?
(a) Scarcity (b) Technological innovation (c) Government planning (d) Custom and tradition
(d) Custom and tradition
300
What does it mean when a group has the comparative advantage?
It means that they can produce a product with the lowest opportunity cost
300
What is the definition of allocative efficiency?
Allocative efficiency is who can produce the most with a set number of resources
300
Sarah has 10 hours available to study for her upcoming economics exam. She can choose to spend her time studying either microeconomics or macroeconomics. Sarah estimates that she can learn 3 chapters of microeconomics per hour and 2 chapters of macroeconomics per hour. Given her time constraint, what is the opportunity cost of studying one additional chapter of microeconomics?
(a) 0.5 chapters of macroeconomics (b) 1 chapter of macroeconomics (c) 1.5 chapters of macroeconomics (d) 2 chapters of macroeconomics
(b) 1 chapter of macroeconomics
300
What are positive economics?
Positive economics is economics based more on facts as compared to the hypothetical nature of normative economics
400
Which statement is NOT true about the "invisible hand" concept in a market economy?
(a) Consumers and producers are guided by self-interest. (b) Prices act as signals that coordinate economic activity. (c) Government intervention is minimal to maximize efficiency. (d) The outcome may not always be optimal for society as a whole.
(c) Government intervention is minimal to maximize efficiency.
400
Country Cars Jets
Alpha 100 20
Beta 50 25
Who has the comparative advantage for jets in this situation?
Alpha has the comparative advantage
400
What are two points on the following PPC that are allocatively efficient?
A and F
400
A large company is deciding whether to expand its production of widgets or focus on researching and developing a new line of gadgets. The company has a fixed amount of resources to allocate between the two projects. The production of widgets requires 10 units of resources per unit, while the research and development of gadgets requires 20 units of resources per project. The company estimates that each additional unit of widget production will generate $5 in profit, while the successful development of a new line of gadgets is estimated to generate $100 in profit.
What is the opportunity cost of developing one new line of gadgets?
(a) $500 (b) $200 (c) $100 (d) $50
b)$200
400
What are incentives?
Incentives are reward that are given in exchange for a particular task
500
In a mixed economy, which of the following is most likely to be provided by the government?
(a) Luxury goods like designer clothes (b) Basic necessities like public education (c) Production of specialized industrial machinery (d) Development and marketing of new consumer electronics
(b) Basic necessities like public education
500
If country A is able to make 100 cars with their current resources and country B can make 50 cars, who has the absolute advantage in this situation?
Country A
500
List all the lettered points where the PPC is productively efficient
A,B,C,D,E and F
500
A student has 12 hours available to spend on two activities: studying for an upcoming economics exam and working part-time at a local coffee shop. The student earns $10 per hour at the coffee shop and estimates that studying for 1 hour increases her score on the exam by 2 points. The student's goal is to maximize the combined benefit of both activities.
What is the opportunity cost of studying for one additional hour in terms of forgone income?
(a) $10 (b) $20 (c) $24 (d) $48
(c) $24
500
What are quotas?
Quotas are specific requirements that workers have to produce