DECA Economics Concepts 2

Question 1

When the government sets a price ceiling below the equilibrium price, what typically results?

Accepted Answer

A shortage of the good

Answer

A price ceiling below equilibrium keeps prices artificially low, causing quantity demanded to exceed quantity supplied, creating a shortage.

Question 2

Which of the following best describes 'comparative advantage'?

Accepted Answer

Producing a good at a lower opportunity cost than others

Answer

Comparative advantage means producing a good or service at a lower opportunity cost relative to others, which is the basis for beneficial trade.

Question 3

A business notices its revenue increases when it lowers prices, suggesting demand for its product is:

Accepted Answer

Elastic

Answer

When revenue rises after a price decrease, the percentage increase in quantity demanded exceeds the percentage price drop, indicating elastic demand.

Question 4

What is the term for the phenomenon where each additional worker hired adds less to total output than the previous one?

Accepted Answer

Diminishing marginal returns

Answer

Diminishing marginal returns occurs when adding more of one input (like labor) while holding others fixed eventually yields smaller and smaller additions to output.

Question 5

In a command economy, who primarily answers the three basic economic questions?

Accepted Answer

The government or central authority

Answer

In a command economy, a central government authority decides what to produce, how to produce it, and for whom to produce it.

(DECA) Distributive Education Clubs of America Practice Test

(DECA) Distributive Education Clubs of America Practice Test

DECA Economics Concepts 2