Econ 1 Question Bank

In a mixed economy, how does government intervention in market failures demonstrate the balance between free enterprise and regulation?

• By completely controlling all economic decisions
• By selectively addressing externalities while preserving market autonomy
• By eliminating all private sector involvement
• By maintaining a purely laissez-faire approach

How does the concept of marginal analysis explain why a restaurant might close despite having a full dining room?

• The restaurant's total revenue exceeds total costs
• Fixed costs are too high to consider
• The marginal cost of serving additional customers exceeds the marginal benefit
• Customer satisfaction is the only relevant factor

How does the shape of a Production Possibilities Curve reflect the law of increasing opportunity costs?

• The curve is perfectly linear
• The curve is concave to the origin due to resource specialization
• The curve shows only one production possibility
• The curve is convex to the origin

What economic principle explains why a country with abundant skilled labor might specialize in technology services rather than agricultural production, even if it can produce both efficiently?

• Absolute advantage
• Comparative advantage
• Economy of scale
• Diminishing returns

How does scarcity influence the development of different economic systems across societies?

• It forces all societies to adopt the same economic system
• It creates a universal solution to resource allocation
• It leads to varying approaches based on cultural and resource factors
• It eliminates the need for economic systems

In what way does technological advancement affect both the Production Possibilities Curve and opportunity costs?

• It only shifts the curve inward
• It shifts the curve outward and may alter the slope of the curve
• It has no effect on opportunity costs
• It only affects current production levels

How do traditional economies address the challenge of resource allocation differently from market economies?

• They rely solely on government planning
• They use only modern technology
• They base decisions on customs and historical practices
• They ignore scarcity completely

What complex relationship exists between command economies and market innovation?

• Command economies always produce more innovation
• Innovation is impossible in command economies
• Central planning can target specific innovations but may stifle spontaneous innovation
• Innovation only occurs in mixed economies

How does the concept of marginal net benefit apply to a student's decision about study time?

• More study time always yields better results
• Study time has no relationship to academic performance
• The optimal study time occurs where marginal benefit equals marginal cost
• Students should minimize study time to maximize efficiency

What economic principle explains why some regions within a country might specialize in certain industries while trading with other regions?

• Random resource distribution
• Regional comparative advantage and opportunity costs
• Government mandate
• Consumer preferences only