Question

1 Which of the following is true?

		opportunity cost can be measured by the slope of the PPC curve (frontier)
		productive or technical efficiency occurs anywhere on the production possibilities curve
		allocative efficiency occurs at a specific point (i.e. a specific mix of production) on the production possibilities curve (frontier) that is valued above all alternatives.
		all of the answers are correct
		none of the answers are correct

2 The opportunity cost of a good is the same as its

		price index.
		money price.
		relative price.
		none of the above.

3 Per class discussion, injections in the circular flow model include:

		consumption spending.
		taxes, savings, and imports.
		government spending, investment, and exports.
		leisure spending.

4 A factor market is a market in which

		households sell the services of the factors of production they control.
		households buy goods and services.
		firms sell goods and services.
		firms sell the services of the factors of production.

5 The principle of increasing opportunity cost occurs because

		resources are being used inefficiently.
		we must give up something to get something else.
		resources are not equally suited to all activities.
		scarcity exists.

6 As long as the marginal benefit from a good is greater than its marginal cost, an economy is operating efficiently.

True

False

7 A circular flow diagram shows the flows from the goods and resources markets.

True

False

Answer 1

Answer:

1. The following is true

All of the answers are correct

2. The opportunity cost of a good is the same as its

           Relative price

3. injections in the circular flow model include:

Government spending, investment, and exports

4. A factor market is a market in which:

Households sell the services of the factors of production they control

Factor market is the market place where factors of production; land, labour, capital and entrepreneur are bought and sold.   

5. The principle of increasing opportunity cost occurs because

Resources are being used inefficiently

The inefficient utilisation and distribution of resources leads to increase in opportunity cost

6. As long as the marginal benefit from a good is greater than its marginal cost, an economy is operating efficiently: True
7. A circular flow diagram shows the flows from the goods and resources markets: True

Circular flow shows the flow of factors of production from household sector to firms and flow of goods and services from firm to households