Question 1

The necessity for choice, in economics, arises from

Accepted Answer

A)  high incomes and many goods. 
B)  scarcity of economic means for satisfying economic wants. 
C)  scarcity of time and knowledge, and numerous similar goods. 
D)  All of the above are correct. 
A)  high incomes and many goods. 
B)  scarcity of economic means for satisfying economic wants. 
C)  scarcity of time and knowledge, and numerous similar goods. 
D)  All of the above are correct.

Question 2

Under laissez faire, the force that drives the economy toward an efficient outcome is

Accepted Answer

A)  central planning. 
B)  majority voting. 
C)  the pursuit of self-interest. 
D)  altruism. 
A)  central planning. 
B)  majority voting. 
C)  the pursuit of self-interest. 
D)  altruism.

Question 3

The existence of a universal law of scarcity creates pressures on societies to

Accepted Answer

A)  use their resources according to government plans. 
B)  economize in the use of their resources. 
C)  allocate their resources equitably. 
D)  exploit their resources. 
A)  use their resources according to government plans. 
B)  economize in the use of their resources. 
C)  allocate their resources equitably. 
D)  exploit their resources.

Question 4

Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as "fairer."

Accepted Answer

A) True 
 B)False

Question 5

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.No corresponding factory produces only right shoes.This outcome is an example of inefficiency in

Accepted Answer

A)  output selection. 
B)  production planning. 
C)  product distribution. 
D)  market segmentation. 
A)  output selection. 
B)  production planning. 
C)  product distribution. 
D)  market segmentation.

Question 6

An efficient allocation of resources is demonstrated by a point

Accepted Answer

A)  above the production possibilities frontier. 
B)  below the production possibilities frontier. 
C)  on the production possibilities frontier. 
D)  near the middle of the production possibilities frontier. 
A)  above the production possibilities frontier. 
B)  below the production possibilities frontier. 
C)  on the production possibilities frontier. 
D)  near the middle of the production possibilities frontier.

Question 7

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

Accepted Answer

The price mechanism solves the distribut

Question 8

The technique that addresses the problem of assigning inputs to specific industries is

Accepted Answer

A)  known as laissez faire. 
B)  input-output analysis. 
C)  cost-benefit analysis. 
D)  a production possibilities frontier. 
A)  known as laissez faire. 
B)  input-output analysis. 
C)  cost-benefit analysis. 
D)  a production possibilities frontier.

Question 9

Higher efficiency in the economy can be reached if prices are held low by law.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following holds true in a market when the invisible hand functions properly?

Accepted Answer

A)  MC = MU = P 
B)  P = MRS 
C)  P = MC but not P = MU 
D)  P = MU but not P = MC 
A)  MC = MU = P 
B)  P = MRS 
C)  P = MC but not P = MU 
D)  P = MU but not P = MC

Question 11

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.

Accepted Answer

Firms are induced to buy and use inputs

Question 12

Lower prices are always better for society.

Accepted Answer

A) True 
 B)False

Question 13

The "invisible hand" refers to the control that government must exercise over a market economy.

Accepted Answer

A) True 
 B)False

Question 14

Questions of what to produce, how much to produce, and who will get the output must be faced by

Accepted Answer

A)  market economies. 
B)  centrally planned economies. 
C)  the economies of underdeveloped countries. 
D)  all economies. 
A)  market economies. 
B)  centrally planned economies. 
C)  the economies of underdeveloped countries. 
D)  all economies.

Question 15

If the marginal cost of producing steel exceeds the marginal utility of using steel, then for economic efficiency,

Accepted Answer

A)  the price of steel should fall. 
B)  society should produce less steel. 
C)  the price of goods made with steel should fall. 
D)  society should direct resources toward steel production and away from the production of other goods. 
A)  the price of steel should fall. 
B)  society should produce less steel. 
C)  the price of goods made with steel should fall. 
D)  society should direct resources toward steel production and away from the production of other goods.

Question 16

Under perfect competition, the lure of profits makes producers try to equate marginal cost and price.

Accepted Answer

A) True 
 B)False

Question 17

What makes production-planning a daunting task for central planners?

Accepted Answer

Because the output required from any one

Question 18

Input-output analysis was developed by Wassily Leontief.

Accepted Answer

A) True 
 B)False

Question 19

Figure 14-2
  
-In Figure 14-2, which movement would represent an improvement for all individuals?

Accepted Answer

A)  A to B 
B)  C to AC 
C)  D to B 
D)  A to D 
A)  A to B 
B)  C to AC 
C)  D to B 
D)  A to D

Question 20

If parking spaces on a college campus are scarce, with quantity demanded during the "peak" hours, from 8 a.m.to 11 a.m., far greater than the number of spaces, an economist would propose as an efficient solution,

Accepted Answer

A)  lowering the parking fees during those hours to compensate students for the longer search time. 
B)  charging the same parking fees during all hours of the school day. 
C)  raising parking fees during the peak hours to encourage some students to schedule classes during other hours when parking fees are lower. 
D)  hiring more security guards to patrol for illegal parkers. 
A)  lowering the parking fees during those hours to compensate students for the longer search time. 
B)  charging the same parking fees during all hours of the school day. 
C)  raising parking fees during the peak hours to encourage some students to schedule classes during other hours when parking fees are lower. 
D)  hiring more security guards to patrol for illegal parkers.

Exam 14: The Case for Free Markets I: The Price System

The necessity for choice, in economics, arises from

Under laissez faire, the force that drives the economy toward an efficient outcome is

The existence of a universal law of scarcity creates pressures on societies to

Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as "fairer."

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.No corresponding factory produces only right shoes.This outcome is an example of inefficiency in

An efficient allocation of resources is demonstrated by a point

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

The technique that addresses the problem of assigning inputs to specific industries is

Higher efficiency in the economy can be reached if prices are held low by law.

Which of the following holds true in a market when the invisible hand functions properly?

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.

Lower prices are always better for society.

The "invisible hand" refers to the control that government must exercise over a market economy.

Questions of what to produce, how much to produce, and who will get the output must be faced by

If the marginal cost of producing steel exceeds the marginal utility of using steel, then for economic efficiency,

Under perfect competition, the lure of profits makes producers try to equate marginal cost and price.

What makes production-planning a daunting task for central planners?

Input-output analysis was developed by Wassily Leontief.

Figure 14-2 -In Figure 14-2, which movement would represent an improvement for all individuals?

If parking spaces on a college campus are scarce, with quantity demanded during the "peak" hours, from 8 a.m.to 11 a.m., far greater than the number of spaces, an economist would propose as an efficient solution,

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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