Question 1

The basic forces driving the "invisible hand" are

Accepted Answer

A) government and business. 
B) information and computer technology. 
C) competition and self-interest. 
D) cooperation and altruism. 
A) government and business. 
B) information and computer technology. 
C) competition and self-interest. 
D) cooperation and altruism.

Question 2

The laissez-faire system relies on the price mechanism to allocate resources.

Accepted Answer

A) True 
 B)False

Question 3

Under laissez-faire, output selection is determined by

Accepted Answer

A) consumer preferences. 
B) production costs. 
C) firms' desires to make profits. 
D) All of the responses are correct. 
A) consumer preferences. 
B) production costs. 
C) firms' desires to make profits. 
D) All of the responses are correct.

Question 4

Society might argue that there are cases in which it is appropriate to resist price increases in situations where scarcity is serious.Included would be the case of

Accepted Answer

A) unrestrained monopoly that would otherwise succeed in extracting funds from the public. 
B) taxes imposed on products capriciously and inappropriately. 
C) rising prices falling so heavily on the poor that rationing becomes preferable. 
D) All of the responses are correct. 
A) unrestrained monopoly that would otherwise succeed in extracting funds from the public. 
B) taxes imposed on products capriciously and inappropriately. 
C) rising prices falling so heavily on the poor that rationing becomes preferable. 
D) All of the responses are correct.

Question 5

If arrival and departure delays are frequent early in the morning and late afternoons, but there are no delays during the evening hours, we can conclude that the airport authority

Accepted Answer

A) charges high landing fees at common departure and arrival times. 
B) is concerned about the delay times. 
C) is charging uniform landing fees throughout the day 
D) should reduce the number of flights during the busy times. 
A) charges high landing fees at common departure and arrival times. 
B) is concerned about the delay times. 
C) is charging uniform landing fees throughout the day 
D) should reduce the number of flights during the busy times.

Question 6

After the Arab oil embargoes, there was concern about the impact of higher gas prices on the low-income worker.The government imposed price controls on oil to protect the poor from this situation.Explain the inefficiency of this price ceiling and how taxes, rather than prices, could be used to solve the problem.

Accepted Answer

By preventing the price of gas from risi

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

Before a market allocation of goods on the production possibilities curve can be judged efficient, one must evaluate "what" goods the market produced.

Accepted Answer

A) True 
 B)False

Question 9

The task of deciding which consumer gets each of the goods produced in a free-market economy is solved by

Accepted Answer

A) the price system. 
B) the industries that produce the goods. 
C) the central planners. 
D) citizens with political power. 
A) the price system. 
B) the industries that produce the goods. 
C) the central planners. 
D) citizens with political power.

Question 10

Central planning is an efficient method for making coordination decisions.

Accepted Answer

A) True 
 B)False

Question 11

Figure 11-1
​  
-In Figure 11-1, what can be concluded about the economy if production moves from Point D to Point A?

Accepted Answer

A) An improvement of calculator technology 
B) An increase in resources for producing other goods 
C) A reduction in the need for calculators in the economy 
D) A more equal distribution of resources in the economy 
A) An improvement of calculator technology 
B) An increase in resources for producing other goods 
C) A reduction in the need for calculators in the economy 
D) A more equal distribution of resources in the economy

Question 12

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.No corresponding factory produces only right shoes.This outcome 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 13

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 14

An efficient distribution of goods requires that

Accepted Answer

A) everyone gets an equal share of each good. 
B) marginal cost equal marginal utility for the last unit produced. 
C) each person derives the same total utility from the good. 
D) since tastes differ, every person pays a different price in accordance with different marginal utilities. 
A) everyone gets an equal share of each good. 
B) marginal cost equal marginal utility for the last unit produced. 
C) each person derives the same total utility from the good. 
D) since tastes differ, every person pays a different price in accordance with different marginal utilities.

Question 15

In a free market, a given unit of an input will be used by the firm that

Accepted Answer

A) earns the largest addition to total profit from the use of that unit of input. 
B) has the lowest marginal cost of producing another unit of output. 
C) sells its output for the highest price. 
D) earns the largest total profit. 
A) earns the largest addition to total profit from the use of that unit of input. 
B) has the lowest marginal cost of producing another unit of output. 
C) sells its output for the highest price. 
D) earns the largest total profit.

Question 16

Scarcity is illustrated graphically by a production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 17

For an efficient outcome, MR must exceed MC.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Command economies are able to achieve greater allocative efficiency than market economies.

Accepted Answer

A) True 
 B)False

Question 20

The producer's surplus is equal to the difference between how much the seller can charge for a product and how much the consumer is willing to purchase it for.

Accepted Answer

A) True 
 B)False

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

The basic forces driving the "invisible hand" are

The laissez-faire system relies on the price mechanism to allocate resources.

Under laissez-faire, output selection is determined by

Society might argue that there are cases in which it is appropriate to resist price increases in situations where scarcity is serious.Included would be the case of

If arrival and departure delays are frequent early in the morning and late afternoons, but there are no delays during the evening hours, we can conclude that the airport authority

An economy is judged efficient if

Before a market allocation of goods on the production possibilities curve can be judged efficient, one must evaluate "what" goods the market produced.

The task of deciding which consumer gets each of the goods produced in a free-market economy is solved by

Central planning is an efficient method for making coordination decisions.

Figure 11-1 ​ -In Figure 11-1, what can be concluded about the economy if production moves from Point D to Point A?

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.No corresponding factory produces only right shoes.This outcome is an example of inefficiency in

An unplanned economy operating under laissez-faire

An efficient distribution of goods requires that

In a free market, a given unit of an input will be used by the firm that

Scarcity is illustrated graphically by a production possibilities frontier.

For an efficient outcome, MR must exceed MC.

An example of peak pricing is charging

Command economies are able to achieve greater allocative efficiency than market economies.

The producer's surplus is equal to the difference between how much the seller can charge for a product and how much the consumer is willing to purchase it for.

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, what can be concluded about the economy if production moves from Point D to Point A?