Question 1

The introduction of a subsidy in a perfectly competitive marketplace that is originally in equilibrium will raise total surplus.

Accepted Answer

A) True 
 B)False

Question 2

The production possibilities frontier illustrates

Accepted Answer

A) the fundamental fact of scarcity. 
B) the opportunity cost of acquiring more of one good. 
C) maximum output utilizing all resources efficiently. 
D) All of the responses are correct. 
A) the fundamental fact of scarcity. 
B) the opportunity cost of acquiring more of one good. 
C) maximum output utilizing all resources efficiently. 
D) All of the responses are correct.

Question 3

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 4

The questions of what to produce, how to produce, and for whom are answered by

Accepted Answer

A) free-market economies. 
B) economies that are a mixture of planning and markets. 
C) command economies. 
D) all economic systems in some manner. 
A) free-market economies. 
B) economies that are a mixture of planning and markets. 
C) command economies. 
D) all economic systems in some manner.

Question 5

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 6

To efficiently manage traffic on a system of bridges,

Accepted Answer

A) the more-crowded bridges should have lower tolls, so that they are affordable. 
B) the tolls should be equal for all bridges, so that people can choose the most convenient routes. 
C) tolls should be higher on more-crowded bridges and lower on less-crowded bridges. 
D) there should be no tolls on bridges, because people should not have to pay to drive to their jobs. 
A) the more-crowded bridges should have lower tolls, so that they are affordable. 
B) the tolls should be equal for all bridges, so that people can choose the most convenient routes. 
C) tolls should be higher on more-crowded bridges and lower on less-crowded bridges. 
D) there should be no tolls on bridges, because people should not have to pay to drive to their jobs.

Question 7

Inefficient allocation of resources occurs when

Accepted Answer

A) no one can be made better off without having someone else give up something. 
B) it is possible to make some people better off without making others worse off. 
C) society is operating at a point high on the production possibilities frontier. 
D) society is operating at a point low on the production possibilities frontier. 
A) no one can be made better off without having someone else give up something. 
B) it is possible to make some people better off without making others worse off. 
C) society is operating at a point high on the production possibilities frontier. 
D) society is operating at a point low on the production possibilities frontier.

Question 8

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 9

The city of London imposes congestion fees on cars and trucks that drive in central London.The charge is higher Monday through Friday than on weekends.This example of

Accepted Answer

A) peak pricing. 
B) positive externalities. 
C) profit maximizing. 
D) British socialism. 
A) peak pricing. 
B) positive externalities. 
C) profit maximizing. 
D) British socialism.

Question 10

High prices do not occur in laissez-faire markets.

Accepted Answer

A) True 
 B)False

Question 11

Economics can decide

Accepted Answer

A) the appropriate trade-off between fairness and efficiency. 
B) which pricing arrangements are fair and which are unfair. 
C) whether a pricing decision will impose heavy inefficiency costs on society. 
D) All of the responses are correct. 
A) the appropriate trade-off between fairness and efficiency. 
B) which pricing arrangements are fair and which are unfair. 
C) whether a pricing decision will impose heavy inefficiency costs on society. 
D) All of the responses are correct.

Question 12

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 13

Politicians always agree with economists about the most efficient way of doing things.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Figure 11-1
​  
-In Figure 11-1, a technological breakdown in calculator production would cause which movement?

Accepted Answer

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

Question 16

Command economies strictly rely on sophisticated input-output analysis to allocate resources.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

The distribution process performed by the price system is not as efficient as the distribution process of central planners.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

Yes.Economic efficiency requires that pr

Question 20

For a rational consumer, the consumer's surplus will never be a negative number.

Accepted Answer

A) True 
 B)False

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

The introduction of a subsidy in a perfectly competitive marketplace that is originally in equilibrium will raise total surplus.

The production possibilities frontier illustrates

To promote economic efficiency, government should

The questions of what to produce, how to produce, and for whom are answered by

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

To efficiently manage traffic on a system of bridges,

Inefficient allocation of resources occurs when

When prices of products are set below equilibrium,

The city of London imposes congestion fees on cars and trucks that drive in central London.The charge is higher Monday through Friday than on weekends.This example of

High prices do not occur in laissez-faire markets.

Economics can decide

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

Politicians always agree with economists about the most efficient way of doing things.

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

Figure 11-1 ​ -In Figure 11-1, a technological breakdown in calculator production would cause which movement?

Command economies strictly rely on sophisticated input-output analysis to allocate resources.

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

The distribution process performed by the price system is not as efficient as the distribution process of central planners.

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

For a rational consumer, the consumer's surplus will never be a negative number.

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 11-1 -In Figure 11-1, a technological breakdown in calculator production would cause which movement?