Question 1

Price increases always reduce economic efficiency.

Accepted Answer

A) True 
 B)False  False

Question 2

When box lunches are handed out at an elementary school, Jimmy (who loves chocolate and hates raisins) gets a raisin cookie and Johnny (who hates chocolate and loves raisins) gets a chocolate chip cookie.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. C

Question 3

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. B

Question 4

Lower prices are a signal of the scarcity of a resource.

Accepted Answer

A) True 
 B)False

Question 5

In a free market, economic activity is coordinated by

Accepted Answer

A) central planners. 
B) prices. 
C) costs. 
D) majority rule. 
A) central planners. 
B) prices. 
C) costs. 
D) majority rule.

Question 6

The assignment of inputs to specific industries by central planners is made difficult by

Accepted Answer

A) the interdependency among industries. 
B) lack of data for decision making. 
C) the danger of a chain reaction among industries if an error is made at any point. 
D) All of the responses are correct. 
A) the interdependency among industries. 
B) lack of data for decision making. 
C) the danger of a chain reaction among industries if an error is made at any point. 
D) All of the responses are correct.

Question 7

Figure 11-2
​  
-The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)

Accepted Answer

A) budget line. 
B) indifference curve. 
C) production possibilities frontier. 
D) marginal cost curve. 
A) budget line. 
B) indifference curve. 
C) production possibilities frontier. 
D) marginal cost curve.

Question 8

The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will only affect consumer's surplus and not producer's surplus.

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

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

Accepted Answer

A) True 
 B)False

Question 11

Free-market economies have led to

Accepted Answer

A) high growth rates but low efficiency. 
B) high efficiency and low growth rates. 
C) high growth rates and high efficiency. 
D) low growth rates and low efficiency. 
A) high growth rates but low efficiency. 
B) high efficiency and low growth rates. 
C) high growth rates and high efficiency. 
D) low growth rates and low efficiency.

Question 12

Whenever MC of the last unit produced of a good is greater than its MU, society can benefit from decreasing the output of that good.

Accepted Answer

A) True 
 B)False

Question 13

There is only one efficient allocation of resources in an economy at one point in time.

Accepted Answer

A) True 
 B)False

Question 14

When the price of the product falls

Accepted Answer

A) consumer's surplus remains the same. 
B) producers' surplus increases. 
C) consumer's surplus falls. 
D) producer's surplus falls. 
A) consumer's surplus remains the same. 
B) producers' surplus increases. 
C) consumer's surplus falls. 
D) producer's surplus falls.

Question 15

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will ____, with the likely result that marginal utility will ____.

Accepted Answer

A) rise; fall 
B) fall; rise 
C) rise; rise 
D) fall; fall 
A) rise; fall 
B) fall; rise 
C) rise; rise 
D) fall; fall

Question 16

Under perfect competition, the market mechanism, without any government regulation, is capable of

Accepted Answer

A) allocating resources efficiently. 
B) solving equity problems. 
C) making the average cost of labor equal to the average cost of all commodities. 
D) making more income available to the poor. 
A) allocating resources efficiently. 
B) solving equity problems. 
C) making the average cost of labor equal to the average cost of all commodities. 
D) making more income available to the poor.

Question 17

Which type of economic system will produce the highest degree of allocative efficiency?

Accepted Answer

A) A perfectly competitive market system 
B) A purely command economic system 
C) A market system with limited price controls and price ceilings 
D) A command system with limited market activity for nonessentials 
A) A perfectly competitive market system 
B) A purely command economic system 
C) A market system with limited price controls and price ceilings 
D) A command system with limited market activity for nonessentials

Question 18

If both the MU and MC of flower pots is $1.50 and the MU and MC of coffee cups is $2, then economic efficiency would require

Accepted Answer

A) increased production of flower pots. 
B) increased production of coffee cups. 
C) the price of coffee cups to exceed the price of flower pots. 
D) the price of flower pots to exceed the price of coffee cups. 
A) increased production of flower pots. 
B) increased production of coffee cups. 
C) the price of coffee cups to exceed the price of flower pots. 
D) the price of flower pots to exceed the price of coffee cups.

Question 19

When a shortage occurs in the market for a good, quantity

Accepted Answer

A) demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. 
B) supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. 
C) demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. 
D) supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption. 
A) demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. 
B) supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. 
C) demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. 
D) supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.

Question 20

In a market economy, goods are allocated to

Accepted Answer

A) all potential uses. 
B) all citizens on an equal basis. 
C) citizens with political power. 
D) citizens with both the desire and the willingness to pay for the goods. 
A) all potential uses. 
B) all citizens on an equal basis. 
C) citizens with political power. 
D) citizens with both the desire and the willingness to pay for the goods.

Exam 11: The Case for Free Markets: the Price System

Price increases always reduce economic efficiency.

When box lunches are handed out at an elementary school, Jimmy (who loves chocolate and hates raisins) gets a raisin cookie and Johnny (who hates chocolate and loves raisins) gets a chocolate chip cookie.This is an example of inefficiency in

Higher prices

Lower prices are a signal of the scarcity of a resource.

In a free market, economic activity is coordinated by

The assignment of inputs to specific industries by central planners is made difficult by

Figure 11-2 ​ -The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)

The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will only affect consumer's surplus and not producer's surplus.

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

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

Free-market economies have led to

Whenever MC of the last unit produced of a good is greater than its MU, society can benefit from decreasing the output of that good.

There is only one efficient allocation of resources in an economy at one point in time.

When the price of the product falls

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will ____, with the likely result that marginal utility will ____.

Under perfect competition, the market mechanism, without any government regulation, is capable of

Which type of economic system will produce the highest degree of allocative efficiency?

If both the MU and MC of flower pots is $1.50 and the MU and MC of coffee cups is $2, then economic efficiency would require

When a shortage occurs in the market for a good, quantity

In a market economy, goods are allocated to

What Is Economics

The Economony: 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

The Financial Markets 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: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 11-2 -The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will , with the likely result that marginal utility will .