Question 1

Scarcity is illustrated graphically by a production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 2

In an effort to prepare for war, the Defense Department is required by Congress to stockpile helium, once used to provide lift for blimps (phased out in the 1960s).About 100 years of total U.S.usage of helium is in storage.The Pentagon agrees to buy helium from producers at a price above what would otherwise prevail in the marketplace.Is this likely to result in efficiency? Explain.

Accepted Answer

No.If the price is held up to provide a

Question 3

The nation listed below whose economy currently comes closest to a free market is

Accepted Answer

A)  North Korea. 
B)  Germany. 
C)  People's Republic of China. 
D)  Cuba. 
A)  North Korea. 
B)  Germany. 
C)  People's Republic of China. 
D)  Cuba.

Question 4

When all prices are set equal to marginal costs,

Accepted Answer

A)  consumers buy more than they should. 
B)  consumers will get less utility. 
C)  markets are giving correct signals to consumers. 
D)  producers make excessive profits. 
A)  consumers buy more than they should. 
B)  consumers will get less utility. 
C)  markets are giving correct signals to consumers. 
D)  producers make excessive profits.

Question 5

Production planning without the market mechanism is very efficiently handled by central planners.

Accepted Answer

A) True 
 B)False

Question 6

Laissez faire refers to a program of minimal interference in the market system.

Accepted Answer

A) True 
 B)False

Question 7

Figure 14-1
  
-In Figure 14-1, a cost-reducing technological breakthrough in calculator production would cause which movement?

Accepted Answer

A)  A to D 
B)  A to C 
C)  A to B 
D)  A to E 
A)  A to D 
B)  A to C 
C)  A to B 
D)  A to E

Question 8

Differentiate between consumer's surplus and producer's surplus.For a rational consumer, consumer's surplus will never be a negative number.Why?

Accepted Answer

The consumer's surplus from a purchase i

Question 9

If a technological breakthrough reduces input quantities needed to produce some item,

Accepted Answer

A)  cost of production will be increased. 
B)  the price of the product will rise. 
C)  the price of the product will fall. 
D)  quantity demanded of the product will fall. 
A)  cost of production will be increased. 
B)  the price of the product will rise. 
C)  the price of the product will fall. 
D)  quantity demanded of the product will fall.

Question 10

In a laissez-faire economy, the price system plays a key role in

Accepted Answer

A)  selecting outputs. 
B)  selecting inputs. 
C)  distributing outputs. 
D)  All of the above are correct. 
A)  selecting outputs. 
B)  selecting inputs. 
C)  distributing outputs. 
D)  All of the above are correct.

Question 11

The coordination task of dividing products among consumers is a problem of

Accepted Answer

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

Question 12

Free markets produce allocatively efficient outcomes and have no flaws.

Accepted Answer

A) True 
 B)False

Question 13

Laissez-faire refers to a situation in which there is ____ with the workings of the market system.

Accepted Answer

A)  zero consumer involvement 
B)  zero government interference 
C)  minimal government interference 
D)  complete government interference 
A)  zero consumer involvement 
B)  zero government interference 
C)  minimal government interference 
D)  complete government interference

Question 14

Under a laissez-faire system,

Accepted Answer

A)  government organizes production and distribution of goods. 
B)  a small bureaucracy of central planners tells firms what to produce and how to produce it. 
C)  costs of production and consumers' demands determine the output mix. 
D)  firms try to produce the goods that they think are good for consumers. 
A)  government organizes production and distribution of goods. 
B)  a small bureaucracy of central planners tells firms what to produce and how to produce it. 
C)  costs of production and consumers' demands determine the output mix. 
D)  firms try to produce the goods that they think are good for consumers.

Question 15

If MU = MC = P, an economist can judge with certainty that the distribution of output is

Accepted Answer

A)  fair. 
B)  equal. 
C)  unbiased. 
D)  efficient. 
A)  fair. 
B)  equal. 
C)  unbiased. 
D)  efficient.

Question 16

An efficient allocation of resources exists if

Accepted Answer

A)  one group of people can get more of the things they want without someone else having to give up anything. 
B)  no one can get more of the things he wants without someone else having to give up something. 
C)  the economy operates at any point under the production possibilities frontier. 
D)  the economy is operating at any point above the production possibilities frontier. 
A)  one group of people can get more of the things they want without someone else having to give up anything. 
B)  no one can get more of the things he wants without someone else having to give up something. 
C)  the economy operates at any point under the production possibilities frontier. 
D)  the economy is operating at any point above the production possibilities frontier.

Question 17

To equalize traffic on transportation routes, a pricing arrangement called "peak, off-peak pricing" would most likely be proposed by

Accepted Answer

A)  economists. 
B)  politicians. 
C)  regulators. 
D)  the general public. 
A)  economists. 
B)  politicians. 
C)  regulators. 
D)  the general public.

Question 18

The price system takes into account consumer preferences in the distribution of goods and services.

Accepted Answer

A) True 
 B)False

Question 19

In a market system, the primary instruments used to coordinate economic activity are

Accepted Answer

A)  plans. 
B)  prices. 
C)  input-output analyses. 
D)  quantities. 
A)  plans. 
B)  prices. 
C)  input-output analyses. 
D)  quantities.

Question 20

In a free-market system, producers will react to an increase in demand when

Accepted Answer

A)  the price goes up. 
B)  the government announces the increased demand. 
C)  their costs increase. 
D)  the free press publishes news of the increased demand. 
A)  the price goes up. 
B)  the government announces the increased demand. 
C)  their costs increase. 
D)  the free press publishes news of the increased demand.

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

Scarcity is illustrated graphically by a production possibilities frontier.

The nation listed below whose economy currently comes closest to a free market is

When all prices are set equal to marginal costs,

Production planning without the market mechanism is very efficiently handled by central planners.

Laissez faire refers to a program of minimal interference in the market system.

Figure 14-1 -In Figure 14-1, a cost-reducing technological breakthrough in calculator production would cause which movement?

Differentiate between consumer's surplus and producer's surplus.For a rational consumer, consumer's surplus will never be a negative number.Why?

If a technological breakthrough reduces input quantities needed to produce some item,

In a laissez-faire economy, the price system plays a key role in

The coordination task of dividing products among consumers is a problem of

Free markets produce allocatively efficient outcomes and have no flaws.

Laissez-faire refers to a situation in which there is ____ with the workings of the market system.

Under a laissez-faire system,

If MU = MC = P, an economist can judge with certainty that the distribution of output is

An efficient allocation of resources exists if

To equalize traffic on transportation routes, a pricing arrangement called "peak, off-peak pricing" would most likely be proposed by

The price system takes into account consumer preferences in the distribution of goods and services.

In a market system, the primary instruments used to coordinate economic activity are

In a free-market system, producers will react to an increase in demand when

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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