Market Economy Review (Final)

What is the fundamental economic problem that all societies face?

• Technology advancement

• Scarcity of resources

• Population growth

• Climate change

When a student chooses to study instead of watching a movie, the movie represents:

• A sunk cost

• An opportunity cost

• A marginal benefit

• A fixed cost

In a market economy, how are most economic decisions made?

• Through central planning

• By government regulation

• Through prices and voluntary exchange

• By international agreements

What typically happens when demand for a product increases while supply remains constant?

• Prices and quantity decrease

• Prices increase and quantity decreases

• Prices decrease and quantity increases

• Prices and quantity increase

Which factor is most likely to motivate entrepreneurs to start a business?

• Government regulations

• Potential for profit

• Social status

• Environmental concerns

What is “elasticity of demand” primarily measuring?

• How quickly a product sells

• Consumer responsiveness to price changes

• Production costs

• Market competition

In marginal analysis, what are decision-makers comparing?

• Total profits and losses

• Past and future costs

• Additional benefits and additional costs

• Fixed and variable costs

How do incentives influence economic behavior?

• They have no effect on decision making

• They only affect government decisions

• They motivate specific actions and choices

• They only work in perfect markets

What is the primary function of competition in markets?

• To eliminate small businesses

• To increase government revenue

• To maintain high prices

• To promote efficiency and innovation

When evaluating long-run decisions, what should individuals primarily consider?

• Only immediate costs

• Short-term benefits exclusively

• Both current and future implications

• Past investments only