Question 1

Free markets produce relatively high levels of efficiency but low rates of growth.

Accepted Answer

A) True 
 B)False

Question 2

Which of the proposals for education reform is likely to be supported by an economist concerned with efficiency?

Accepted Answer

A)  Give families "education stamps" to be spent at the school of their choice. 
B)  Assign children to particular schools based on where they live. 
C)  Give all schoolchildren the same number of years of education. 
D)  Abolish private (i.e., fee-charging) schools. 
A)  Give families "education stamps" to be spent at the school of their choice. 
B)  Assign children to particular schools based on where they live. 
C)  Give all schoolchildren the same number of years of education. 
D)  Abolish private (i.e., fee-charging) schools.

Question 3

An unplanned economy operating under laissez faire

Accepted Answer

A)  allocates resources by market supply and demand. 
B)  cannot respond to basic questions about production and distribution. 
C)  shows breakdowns with frequent surpluses and shortages. 
D)  allocates goods and services under government subsidy. 
A)  allocates resources by market supply and demand. 
B)  cannot respond to basic questions about production and distribution. 
C)  shows breakdowns with frequent surpluses and shortages. 
D)  allocates goods and services under government subsidy.

Question 4

Define the following terms and explain why they are important in the study of economics.
a.efficient allocation
b.laissez faire
c.peak pricing
d.input-output analysis
e.coordination tasks

Accepted Answer

a.An efficient allocation of resources i

Question 5

There are only two people in the world (Adam and Eve) and only one good (apples).Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20.Which of the following statements must be true?

Accepted Answer

A)  Eve's marginal utility from consuming her fourth apple must be greater than Adam's marginal utility from consuming his fourth apple. 
B)  The total utility of society will rise if Adam gives Eve one apple. 
C)  If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption. 
D)  Adam's average utility from consuming apples is greater than Eve's average utility from consuming apples. 
A)  Eve's marginal utility from consuming her fourth apple must be greater than Adam's marginal utility from consuming his fourth apple. 
B)  The total utility of society will rise if Adam gives Eve one apple. 
C)  If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption. 
D)  Adam's average utility from consuming apples is greater than Eve's average utility from consuming apples.

Question 6

In a classic administrative snafu, the Army assigns trained classical musicians to kitchen duty and places trained cooks in the military band.This 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 7

When prices of products are set below equilibrium,

Accepted Answer

A)  society's resources are inefficiently allocated. 
B)  firms expand output to increase profits. 
C)  firms earn excessively high profits. 
D)  consumers benefit from surpluses of cheap goods. 
A)  society's resources are inefficiently allocated. 
B)  firms expand output to increase profits. 
C)  firms earn excessively high profits. 
D)  consumers benefit from surpluses of cheap goods.

Question 8

Any increase in efficiency increases output available for distribution.

Accepted Answer

A) True 
 B)False

Question 9

It is in society's best interest that the MC of the last unit produced of a good is equal to its MU.

Accepted Answer

A) True 
 B)False

Question 10

Economics tells us which resource allocations are preferable.

Accepted Answer

A) True 
 B)False

Question 11

Economists can evaluate the desirability of the distribution of income.

Accepted Answer

A) True 
 B)False

Question 12

The allocation of resources is efficient under an idealized free market system.

Accepted Answer

A) True 
 B)False

Question 13

Central planning is an efficient method for making coordination decisions.

Accepted Answer

A) True 
 B)False

Question 14

To promote economic efficiency, government should

Accepted Answer

A)  keep all prices as low as possible. 
B)  keep all prices high so that people will save more money. 
C)  allow the market to set low prices for abundant goods and high prices for scarce goods. 
D)  never interfere with firms' price setting powers. 
A)  keep all prices as low as possible. 
B)  keep all prices high so that people will save more money. 
C)  allow the market to set low prices for abundant goods and high prices for scarce goods. 
D)  never interfere with firms' price setting powers.

Question 15

Figure 14-2
  
-In Figure 14-2, which of the points are efficient allocations of resources?

Accepted Answer

A)  A, B, and C 
B)  B and C only 
C)  C and B and D 
D)  B only 
A)  A, B, and C 
B)  B and C only 
C)  C and B and D 
D)  B only

Question 16

Input-output analysis is a technique used to solve complicated market equations.

Accepted Answer

A) True 
 B)False

Question 17

The price system automatically leads to an efficient allocation of inputs among the different production processes.

Accepted Answer

A) True 
 B)False

Question 18

Is peak pricing economically efficient? Explain.Give an example to illustrate your answer.

Accepted Answer

Yes.Economic efficiency requires that pr

Question 19

Mutually beneficial trade is possible because of differing marginal utilities.

Accepted Answer

A) True 
 B)False

Question 20

Centrally planned economies use free-market systems for their production planning.

Accepted Answer

A) True 
 B)False

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

Free markets produce relatively high levels of efficiency but low rates of growth.

Which of the proposals for education reform is likely to be supported by an economist concerned with efficiency?

An unplanned economy operating under laissez faire

Define the following terms and explain why they are important in the study of economics. a.efficient allocation b.laissez faire c.peak pricing d.input-output analysis e.coordination tasks

There are only two people in the world (Adam and Eve) and only one good (apples).Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20.Which of the following statements must be true?

In a classic administrative snafu, the Army assigns trained classical musicians to kitchen duty and places trained cooks in the military band.This is an example of inefficiency in

When prices of products are set below equilibrium,

Any increase in efficiency increases output available for distribution.

It is in society's best interest that the MC of the last unit produced of a good is equal to its MU.

Economics tells us which resource allocations are preferable.

Economists can evaluate the desirability of the distribution of income.

The allocation of resources is efficient under an idealized free market system.

Central planning is an efficient method for making coordination decisions.

To promote economic efficiency, government should

Figure 14-2 -In Figure 14-2, which of the points are efficient allocations of resources?

Input-output analysis is a technique used to solve complicated market equations.

The price system automatically leads to an efficient allocation of inputs among the different production processes.

Is peak pricing economically efficient? Explain.Give an example to illustrate your answer.

Mutually beneficial trade is possible because of differing marginal utilities.

Centrally planned economies use free-market systems for their production planning.

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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