Question 1

Other things being equal, a tax on producers results in deadweight loss.

Accepted Answer

A) True 
 B)False

Question 2

Define Pareto efficiency.

Accepted Answer

Pareto efficiency is achieved

Question 3

Why is informational efficiency difficult to achieve in a centrally planned economy?

Accepted Answer

All information must accurately flow to

Question 4

A price floor results in a decrease in deadweight loss.

Accepted Answer

A) True 
 B)False

Question 5

The price system has its largest informational advantage

Accepted Answer

A) any time exchange must take place and different individuals have comparative advantages. 
B) when parties to exchanges are spread out and very close coordination is not necessary. 
C) in government bureaucracy. 
D) in large business enterprises where production is in many locations. 
E) in small business enterprises where all production is one location. 
A) any time exchange must take place and different individuals have comparative advantages. 
B) when parties to exchanges are spread out and very close coordination is not necessary. 
C) in government bureaucracy. 
D) in large business enterprises where production is in many locations. 
E) in small business enterprises where all production is one location.

Question 6

The first theorem of welfare economics concerns the efficiency of competitive markets.

Accepted Answer

A) True 
 B)False

Question 7

Other things being equal, the more elastic supply is, the larger is the increase in price as a result of a tax on producers.

Accepted Answer

A) True 
 B)False

Question 8

Income equality is achieved when society achieves efficiency.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 7-1  
-Refer to Exhibit 7-1. Total output in the market is 6 units. To achieve efficiency, Firm B should produce

Accepted Answer

A) 1 unit. 
B) 3 units. 
C) 4 units. 
D) 5 units. 
E) 6 units. 
A) 1 unit. 
B) 3 units. 
C) 4 units. 
D) 5 units. 
E) 6 units.

Question 10

The only way price and quantity will not change when a tax is assessed on producers is for

Accepted Answer

A) demand to be perfectly inelastic. 
B) supply to be perfectly elastic and demand to be perfectly inelastic. 
C) supply to be perfectly elastic. 
D) supply to be perfectly inelastic. 
E) demand to be perfectly elastic. 
A) demand to be perfectly inelastic. 
B) supply to be perfectly elastic and demand to be perfectly inelastic. 
C) supply to be perfectly elastic. 
D) supply to be perfectly inelastic. 
E) demand to be perfectly elastic.

Question 11

Pareto efficiency occurs when there is no difference in the levels of income among individuals.

Accepted Answer

A) True 
 B)False

Question 12

Deadweight loss

Accepted Answer

A) is a problem only when more than the equilibrium quantity is produced. 
B) is a loss of producer and consumer surplus. 
C) is a problem only when less than the equilibrium quantity is produced. 
D) occurs when Pareto efficiency is achieved. 
E) is typically an example of market failure. 
A) is a problem only when more than the equilibrium quantity is produced. 
B) is a loss of producer and consumer surplus. 
C) is a problem only when less than the equilibrium quantity is produced. 
D) occurs when Pareto efficiency is achieved. 
E) is typically an example of market failure.

Question 13

Deadweight loss occurs in

Accepted Answer

A) a price floor but not a price ceiling. 
B) a price ceiling but not a price floor. 
C) both a price floor and a price ceiling. 
D) neither a price floor nor a price ceiling. 
E) market equilibrium. 
A) a price floor but not a price ceiling. 
B) a price ceiling but not a price floor. 
C) both a price floor and a price ceiling. 
D) neither a price floor nor a price ceiling. 
E) market equilibrium.

Question 14

Exhibit 7-13  
-Refer to Exhibit 7-13. There is no deadweight loss as a result of a tax of $10 per unit on producers if

Accepted Answer

A) a minimum price of $50 is established by the government. 
B) the government requires production of 700 units. 
C) a consumer-paid tax of $10 is imposed by the government. 
D) the government regulates production to 300 units. 
E) the government restricts the quantity consumers can buy to 400 units. 
A) a minimum price of $50 is established by the government. 
B) the government requires production of 700 units. 
C) a consumer-paid tax of $10 is imposed by the government. 
D) the government regulates production to 300 units. 
E) the government restricts the quantity consumers can buy to 400 units.

Question 15

When great precision in the coordination of individual productive activities is required,

Accepted Answer

A) such activity must be organized by the government. 
B) economic activity comes to a stop. 
C) the price (or market) system must be completely scrapped. 
D) monarchy is necessary. 
E) organizations such as firms are formed. 
A) such activity must be organized by the government. 
B) economic activity comes to a stop. 
C) the price (or market) system must be completely scrapped. 
D) monarchy is necessary. 
E) organizations such as firms are formed.

Question 16

At an equilibrium price,

Accepted Answer

A) both producers and consumers are satisfied with the quantity traded. 
B) only consumers are satisfied with the amount they can buy. 
C) only producers are satisfied with the amount traded. 
D) neither consumers nor producers are satisfied with the quantity traded. 
E) the willingness to sell and the willingness to buy are left out of balance. 
A) both producers and consumers are satisfied with the quantity traded. 
B) only consumers are satisfied with the amount they can buy. 
C) only producers are satisfied with the amount traded. 
D) neither consumers nor producers are satisfied with the quantity traded. 
E) the willingness to sell and the willingness to buy are left out of balance.

Question 17

Without market coordination,

Accepted Answer

A) violent force is necessary to motivate individuals. 
B) a society disintegrates. 
C) the problem of scarcity can be controlled. 
D) central direction is necessary. 
E) an orderly society can at last be a possibility. 
A) violent force is necessary to motivate individuals. 
B) a society disintegrates. 
C) the problem of scarcity can be controlled. 
D) central direction is necessary. 
E) an orderly society can at last be a possibility.

Question 18

Which of the following statements is true?

Accepted Answer

A) A tax assessed on producers shifts up supply. 
B) A specific tax assessed on producers does not affect consumers. 
C) A tax assessed on producers shifts down supply. 
D) An ad valorem tax assessed on producers does not affect consumers 
E) A tax assessed on producers shifts both the supply and demand curves. 
A) A tax assessed on producers shifts up supply. 
B) A specific tax assessed on producers does not affect consumers. 
C) A tax assessed on producers shifts down supply. 
D) An ad valorem tax assessed on producers does not affect consumers 
E) A tax assessed on producers shifts both the supply and demand curves.

Question 19

A price ceiling results in deadweight loss.

Accepted Answer

A) True 
 B)False

Question 20

How is information conveyed from one individual participant to another in a market system?

Accepted Answer

Information is passe

Exam 7: The Efficiency of Markets

Other things being equal, a tax on producers results in deadweight loss.

Define Pareto efficiency.

Why is informational efficiency difficult to achieve in a centrally planned economy?

A price floor results in a decrease in deadweight loss.

The price system has its largest informational advantage

The first theorem of welfare economics concerns the efficiency of competitive markets.

Other things being equal, the more elastic supply is, the larger is the increase in price as a result of a tax on producers.

Income equality is achieved when society achieves efficiency.

Exhibit 7-1 -Refer to Exhibit 7-1. Total output in the market is 6 units. To achieve efficiency, Firm B should produce

The only way price and quantity will not change when a tax is assessed on producers is for

Pareto efficiency occurs when there is no difference in the levels of income among individuals.

Deadweight loss

Deadweight loss occurs in

Exhibit 7-13 -Refer to Exhibit 7-13. There is no deadweight loss as a result of a tax of $10 per unit on producers if

When great precision in the coordination of individual productive activities is required,

At an equilibrium price,

Without market coordination,

Which of the following statements is true?

A price ceiling results in deadweight loss.

How is information conveyed from one individual participant to another in a market system?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters