ECON 1BB3 Test 1 Review Questions S18 – Answers
Efficiency is the property of society getting the most it can from its scarce
resources. Equity is defined as the property of distributing economic prosperity
fairly among the members of society. Often, these two goals conflict. When the
government redistributes income from the rich to the poor, it reduces the reward
for working hard. Fewer goods and services are produced and the economic pie
gets smaller. When the government tries to cut the economic pie into more equal
slices, the pie gets smaller. Policies aimed at achieving a more equal distribution
of economic well-being, such as the welfare system, try to help those members
of society who are most in need. The individual income tax asks the financially
successful to contribute more than others to support the government.
a, b, e, g, h, and j are microeconomic topics. c, d, f, and i are macroeconomic
a, c, e, f, and i are positive statements. b, d, g, h, and j are normative
See answers below:
The name of the shape of the frontier is “bowed outward” or “concave” to
These points are efficient because they lie
on the boundary of the production possibility frontier.
is inefficient because it lies inside the production possibilities
Points inside the production possibilities frontier represent resources that
are wasted, idle or misallocated.
region is represented by points on or inside the production
possibilities frontier. (see diagram)