PRINCIPLES OF ECONOMICS EXAM B
COMPREHENSIVE TEST PAPER QUESTIONS
AND SOLUTIONS GRADED A+
◉ Efficiency.
Answer: getting the most that we can out of our scarce resources
(maximum output)
◉ Equity.
Answer: -distributing output in a fair manner
-Examples: progressive income tax system (equity, trying to
distribute money more fairly), unemployment benefits
◉ opportunity cost.
Answer: -Whatever must be given to obtain some item
-Cost of the alternative
-Coming to college after high school
-Opportunity cost college: full-time current wages
-Opportunity cost work: education, higher future wages
-Could be constant resulting in a straight line PPF, or increasing
resulting in a concave PPF
,-The opportunity cost of a good increases as more of the good is
produced.
-Why? Resources are not equally efficient in the production of both
goods.
-Some resources are better suited to one task than another. The first
resources to "switch" are the one best suited to switching.
◉ scarcity.
Answer: -The limited nature of society's resources
-All decisions involve trade offs (choices) because of scarcity
-To get something, we usually have to give up something else
◉ Types of Economic Systems.
Answer: 1. Pure Capitalism (market economies)
2. Command/planned economy
3. Mixed economies
◉ Pure Capitalism.
Answer: -Property is privately owned and markets determine what
quantities of goods, services, and resources are sold
-Decisions are made by households and firms
-No government intervention
, ◉ Command/Planned economy.
Answer: -Pretty much Communist economies (North Korea, Russia)
-All resources are publicly owned by the government and the central
authorities dictate how such resources are allocated
-What, how, and for whom are decided by government planning
-Companies are assigned specific output goals, given allocation of
certain quantity of resources
-Output is distributed in accordance with government objectives
◉ Mixed Economy.
Answer: -USA
-Mixes pure capitalism and command
-Some resources are owned privately, others publicly (schools,
Amtrak, public parks)
-Some economic decisions are made by the government, other by
market
◉ Market failure.
Answer: market fails to allocate resources efficiently on its own
◉ Monopoly.
Answer: -One seller of a good or service
-Price Maker
COMPREHENSIVE TEST PAPER QUESTIONS
AND SOLUTIONS GRADED A+
◉ Efficiency.
Answer: getting the most that we can out of our scarce resources
(maximum output)
◉ Equity.
Answer: -distributing output in a fair manner
-Examples: progressive income tax system (equity, trying to
distribute money more fairly), unemployment benefits
◉ opportunity cost.
Answer: -Whatever must be given to obtain some item
-Cost of the alternative
-Coming to college after high school
-Opportunity cost college: full-time current wages
-Opportunity cost work: education, higher future wages
-Could be constant resulting in a straight line PPF, or increasing
resulting in a concave PPF
,-The opportunity cost of a good increases as more of the good is
produced.
-Why? Resources are not equally efficient in the production of both
goods.
-Some resources are better suited to one task than another. The first
resources to "switch" are the one best suited to switching.
◉ scarcity.
Answer: -The limited nature of society's resources
-All decisions involve trade offs (choices) because of scarcity
-To get something, we usually have to give up something else
◉ Types of Economic Systems.
Answer: 1. Pure Capitalism (market economies)
2. Command/planned economy
3. Mixed economies
◉ Pure Capitalism.
Answer: -Property is privately owned and markets determine what
quantities of goods, services, and resources are sold
-Decisions are made by households and firms
-No government intervention
, ◉ Command/Planned economy.
Answer: -Pretty much Communist economies (North Korea, Russia)
-All resources are publicly owned by the government and the central
authorities dictate how such resources are allocated
-What, how, and for whom are decided by government planning
-Companies are assigned specific output goals, given allocation of
certain quantity of resources
-Output is distributed in accordance with government objectives
◉ Mixed Economy.
Answer: -USA
-Mixes pure capitalism and command
-Some resources are owned privately, others publicly (schools,
Amtrak, public parks)
-Some economic decisions are made by the government, other by
market
◉ Market failure.
Answer: market fails to allocate resources efficiently on its own
◉ Monopoly.
Answer: -One seller of a good or service
-Price Maker
