Demand And A Little Scarcity

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| By Kerikeri
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Demand And A Little Scarcity - Quiz

10 questions for this weeks fiveski.


Questions and Answers
  • 1. 

    When economists talk about `economic efficiency' they are implying that  

    • A.

      All economic resources are being fully utilised

    • B.

      the best quality resources are acquired by firms in factor markets

    • C.

      Society is making the best possible use of available resources

    • D.

      Unemployment of any resources is being minimised

    Correct Answer
    A. All economic resources are being fully utilised
    Explanation
    The correct answer is that when economists talk about "economic efficiency," they are implying that all economic resources are being fully utilized. This means that there is no wastage or idle resources in the economy, and all resources are being used to their maximum potential. Economic efficiency is important because it ensures that resources are not being wasted and that the economy is operating at its highest level of productivity.

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  • 2. 

    The government builds a new local hospital worth $4 million as opposed to two new primary schools costing $2 million each.  The opportunity cost of the hospital was

    • A.

      The $4 million lost from government consolidated revenue

    • B.

      The capital outlay plus any other ongoing medical expenses

    • C.

      The two primary schools

    • D.

      Indeterminant since insufficient cost information is given

    Correct Answer
    C. The two primary schools
    Explanation
    The opportunity cost of the hospital was the two primary schools. This means that by choosing to build the hospital, the government had to forgo the opportunity to build the two primary schools. The cost of the hospital is not the opportunity cost, but rather the alternative that was not chosen.

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  • 3. 

    Production possibility curves are likely to be curved rather than straight lines since

    • A.

      Resources are more productive in certain uses compared to others

    • B.

      Relative scarcity ensures a constant rate of opportunity cost

    • C.

      The price of either good will vary according to demand and supply

    • D.

      It is assumed that the quantity of available resources is fixed

    Correct Answer
    A. Resources are more productive in certain uses compared to others
    Explanation
    Production possibility curves are likely to be curved rather than straight lines because resources are more productive in certain uses compared to others. This means that some resources are better suited for producing one good compared to another. As a result, the opportunity cost of producing one good increases as more of it is produced, leading to a curved shape on the production possibility curve. This reflects the trade-off between producing different goods and the limited availability of resources.

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  • 4. 

    The following shift in demand may be caused by these factors except  

    • A.

      An increase in credit availability

    • B.

      A fall in the price of a substitute

    • C.

      A successful advertising campaign

    • D.

      The anticipated introduction of a consumption tax

    Correct Answer
    B. A fall in the price of a substitute
    Explanation
    A fall in the price of a substitute would actually cause a shift in demand. When the price of a substitute falls, consumers are more likely to switch to the cheaper alternative, leading to a decrease in demand for the original product. Therefore, this factor does cause a shift in demand and is not an exception.

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  • 5. 

    The quantity of petrol demanded will contract when there is

    • A.

      An increase in the cost of motor vehicles

    • B.

      An increase in the price of petrol

    • C.

      A fall in household disposable income

    • D.

      Cheaper public transport available to households

    Correct Answer
    B. An increase in the price of petrol
    Explanation
    When the price of petrol increases, it becomes more expensive for consumers to purchase petrol. As a result, consumers may choose to reduce their consumption of petrol by driving less or finding alternative modes of transportation. This decrease in demand for petrol leads to a contraction in the quantity of petrol demanded.

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  • 6. 

    If brands J and K are substitutes then an increase in the price of J will (a)       decrease the demand for K (b)       increase the demand for J (c)        increase the demand for K (d)       have little effect on the demand for J

    • A.

      Decrease the demand for K

    • B.

      Increase the demand for J

    • C.

      Increase the demand for K

    • D.

      Have little effect on the demand for J

    Correct Answer
    C. Increase the demand for K
    Explanation
    If brands J and K are substitutes, it means that they can be used interchangeably to satisfy a particular need or want. When the price of J increases, consumers are likely to switch to brand K as it becomes relatively cheaper. This increase in demand for brand K is a result of consumers substituting J with K due to the price increase. Therefore, an increase in the price of J will increase the demand for K.

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  • 7. 

    A derived demand is said to exist when (Hint: a factor market is one where demand and supply exists for the 'factors' of production. This is just another name for your 3 resource groups, natural, human and capital)

    • A.

      Resources are demanded in the factor market in response to the demand for final goods

    • B.

      resources are derived from a limited quantity of inputs

    • C.

      the demand for resources is derived from the supply of final goods and services

    • D.

      Final products are offered for sale in the factor market

    Correct Answer
    A. Resources are demanded in the factor market in response to the demand for final goods
    Explanation
    A derived demand exists when resources are demanded in the factor market in response to the demand for final goods. This means that the demand for resources is derived from the demand for final goods and services. In other words, when there is an increase in the demand for final products, there is also an increase in the demand for the resources needed to produce those products. This concept highlights the interdependence between the demand for final goods and the demand for resources in the factor market.

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  • 8. 

    The following diagram illustrates the market for child-care services. A shift in demand from D to D1 is best explained by:    

    • A.

      A decrease in the number of young families

    • B.

      An increase in child-care subsidies offered by the government

    • C.

      a reduction in available staff and facilities for child-care

    • D.

      An increase in the price of child-care

    Correct Answer
    A. A decrease in the number of young families
    Explanation
    A shift in demand from D to D1 can be best explained by a decrease in the number of young families. When the number of young families decreases, there will be fewer parents in need of child-care services, resulting in a decrease in demand for child-care. This shift in demand is represented by the movement from D to D1 on the demand curve.

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  • 9. 

  • 10. 

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