Question 1

The market allocates goods to individuals according to the individuals'

Accepted Answer

A)  desire for the good. 
B)  ability to pay for the good. 
C)  desire and ability to pay for the good. 
D)  political influence. 
A)  desire for the good. 
B)  ability to pay for the good. 
C)  desire and ability to pay for the good. 
D)  political influence.

Question 2

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

Accepted Answer

No.The market system, by itself, will te

Question 3

For an efficient outcome, MR must exceed MC.

Accepted Answer

A) True 
 B)False

Question 4

In a free-market economy, prices coordinate society's decisions about

Accepted Answer

A)  how and for whom to produce. 
B)  what, how, and for whom to produce. 
C)  how and for whom to produce but not how much to produce. 
D)  how much and for whom to produce but not how to produce. 
A)  how and for whom to produce. 
B)  what, how, and for whom to produce. 
C)  how and for whom to produce but not how much to produce. 
D)  how much and for whom to produce but not how to produce.

Question 5

The nation listed below whose economy comes closest to a centrally planned economy is

Accepted Answer

A)  People's Republic of China. 
B)  Japan. 
C)  United Kingdom. 
D)  United States. 
A)  People's Republic of China. 
B)  Japan. 
C)  United Kingdom. 
D)  United States.

Question 6

What does the production possibility curve imply about the resource allocation?

Accepted Answer

A)  Only some points on the curve are efficient. 
B)  All points on the curve are equally efficient. 
C)  A point which lies below the curve is more efficient. 
D)  A point which lies above the curve is readily achievable. 
A)  Only some points on the curve are efficient. 
B)  All points on the curve are equally efficient. 
C)  A point which lies below the curve is more efficient. 
D)  A point which lies above the curve is readily achievable.

Question 7

An economy is judged efficient if

Accepted Answer

A)  it is good at producing what people want. 
B)  it produces things that people may not want but in the least wasteful way. 
C)  produces whatever people want in a way that may not be the least wasteful. 
D)  it is a free-market economy and not a command market. 
A)  it is good at producing what people want. 
B)  it produces things that people may not want but in the least wasteful way. 
C)  produces whatever people want in a way that may not be the least wasteful. 
D)  it is a free-market economy and not a command market.

Question 8

"Fair" outcomes and "efficient" outcomes are always identical.

Accepted Answer

A) True 
 B)False

Question 9

If the marginal utility of a gallon of milk to consumers is $2.50 and the MC of producing the gallon of milk is $1.50, then

Accepted Answer

A)  the value of the resources used up in producing one more gallon of milk would be $1 less than the money value of the additional gallon to consumers. 
B)  society could be made better off by expanding the output of milk. 
C)  resources are not being used most efficiently. 
D)  All of the above are true. 
A)  the value of the resources used up in producing one more gallon of milk would be $1 less than the money value of the additional gallon to consumers. 
B)  society could be made better off by expanding the output of milk. 
C)  resources are not being used most efficiently. 
D)  All of the above are true.

Question 10

Higher prices

Accepted Answer

A)  are always against the public interest. 
B)  may sometimes serve the public interest. 
C)  should never be allowed. 
D)  occur automatically for abundant goods. 
A)  are always against the public interest. 
B)  may sometimes serve the public interest. 
C)  should never be allowed. 
D)  occur automatically for abundant goods.

Question 11

Price decreases always increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 12

Division of iron ore between the production of bridge girders and tanker drums is an example of

Accepted Answer

A)  a distribution problem. 
B)  production planning. 
C)  input-output analysis. 
D)  both output selection and distribution 
A)  a distribution problem. 
B)  production planning. 
C)  input-output analysis. 
D)  both output selection and distribution

Question 13

To be efficient, outputs should be produced that minimize total cost.

Accepted Answer

A) True 
 B)False

Question 14

The production possibilities frontier illustrates

Accepted Answer

A)  the constant rate of technological progress. 
B)  the fundamental concept of scarcity. 
C)  the rapid growth of the U.S.economy. 
D)  that guns always trade for butter. 
A)  the constant rate of technological progress. 
B)  the fundamental concept of scarcity. 
C)  the rapid growth of the U.S.economy. 
D)  that guns always trade for butter.

Question 15

Central planners in command economies

Accepted Answer

A)  generally set production targets for firms. 
B)  always consult consumers on the output of goods they want to consume. 
C)  allow prices to organize the economy's production. 
D)  depend upon the invisible hand to coordinate economic activities. 
A)  generally set production targets for firms. 
B)  always consult consumers on the output of goods they want to consume. 
C)  allow prices to organize the economy's production. 
D)  depend upon the invisible hand to coordinate economic activities.

Question 16

If the marginal utility of a product exceeds its MC, we would want, on efficiency grounds, to

Accepted Answer

A)  increase production. 
B)  decrease production. 
C)  leave production constant. 
D)  One cannot tell without knowing the price. 
A)  increase production. 
B)  decrease production. 
C)  leave production constant. 
D)  One cannot tell without knowing the price.

Question 17

With a monopoly, the total surplus is lower than it would be with a perfectly competitive industry.

Accepted Answer

A) True 
 B)False

Question 18

Jupiter likes moons more than rings and gets marginal utility worth $5 from the last moon, and $2 from the last ring.Saturn prefers rings, getting MU = $3 from the last ring and $1 from moons.Describe a trade that would increase efficiency.

Accepted Answer

Jupiter could trade a ring to Saturn.Sat

Question 19

An example of peak pricing is charging

Accepted Answer

A)  more for long-distance phone calls in the daytime. 
B)  less for electricity at night. 
C)  more for public transportation in rush hours. 
D)  All of the above are true. 
A)  more for long-distance phone calls in the daytime. 
B)  less for electricity at night. 
C)  more for public transportation in rush hours. 
D)  All of the above are true.

Question 20

Under laissez faire, the allocation of resources among different products depends on

Accepted Answer

A)  consumer preferences. 
B)  production costs. 
C)  Both a and b are correct. 
D)  Neither a nor b is correct. 
A)  consumer preferences. 
B)  production costs. 
C)  Both a and b are correct. 
D)  Neither a nor b is correct.

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

The market allocates goods to individuals according to the individuals'

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

For an efficient outcome, MR must exceed MC.

In a free-market economy, prices coordinate society's decisions about

The nation listed below whose economy comes closest to a centrally planned economy is

What does the production possibility curve imply about the resource allocation?

An economy is judged efficient if

"Fair" outcomes and "efficient" outcomes are always identical.

If the marginal utility of a gallon of milk to consumers is $2.50 and the MC of producing the gallon of milk is $1.50, then

Higher prices

Price decreases always increase economic efficiency.

Division of iron ore between the production of bridge girders and tanker drums is an example of

To be efficient, outputs should be produced that minimize total cost.

The production possibilities frontier illustrates

Central planners in command economies

If the marginal utility of a product exceeds its MC, we would want, on efficiency grounds, to

With a monopoly, the total surplus is lower than it would be with a perfectly competitive industry.

Jupiter likes moons more than rings and gets marginal utility worth $5 from the last moon, and $2 from the last ring.Saturn prefers rings, getting MU = $3 from the last ring and $1 from moons.Describe a trade that would increase efficiency.

An example of peak pricing is charging

Under laissez faire, the allocation of resources among different products depends on

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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