Question 1

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

Accepted Answer

A) Administered system 
B) Government 
C) Price system 
D) Central planning 
A) Administered system 
B) Government 
C) Price system 
D) Central planning

Question 2

"Peak pricing" can often improve economic efficiency.

Accepted Answer

A) True 
 B)False

Question 3

Perfect central planning is nearly impossible for all of these reasons except

Accepted Answer

A) production processes between industries are often interdependent. 
B) some processes must be decided together, and not individually, because of their interdependence. 
C) if the output target for one industry is adjusted, many others must also be adjusted. 
D) All of these reasons are correct. 
A) production processes between industries are often interdependent. 
B) some processes must be decided together, and not individually, because of their interdependence. 
C) if the output target for one industry is adjusted, many others must also be adjusted. 
D) All of these reasons are correct.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Under laissez-faire, the allocation of resources among different products depends on

Accepted Answer

A) consumer preferences. 
B) production costs. 
C) Both a and b are correct. 
D) Neither a nor b is correct. 
A) consumer preferences. 
B) production costs. 
C) Both a and b are correct. 
D) Neither a nor b is correct.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

In many cities, the price of summer pops concerts has risen.In Charlotte, North Carolina, and Columbus, Ohio, for example, concerts that were once free now cost $5.If there are only fixed costs and no variable costs nor marginal costs in an orchestra concert, what is the efficient price? Explain the reason why some people will find the efficient price unfair.

Accepted Answer

If MC = 0, then the performances should

Question 8

In the case of the production of electronic calculators, introduced in the United States in the 1960s,

Accepted Answer

A) a technological breakthrough reduced the input quantities needed to produce them. 
B) quantity demanded increased significantly as prices fell. 
C) production costs fell with advances in technology. 
D) All of the responses are correct. 
A) a technological breakthrough reduced the input quantities needed to produce them. 
B) quantity demanded increased significantly as prices fell. 
C) production costs fell with advances in technology. 
D) All of the responses are correct.

Question 9

In a competitive market economy, a resource in short supply will be allocated

Accepted Answer

A) so that each firm gets enough to keep producing some portion of its output. 
B) according to how much each firm purchased before the shortage. 
C) to those firms that can make the most profitable use of it. 
D) by government fiat. 
A) so that each firm gets enough to keep producing some portion of its output. 
B) according to how much each firm purchased before the shortage. 
C) to those firms that can make the most profitable use of it. 
D) by government fiat.

Question 10

Figure 11-2
​  
-In Figure 11-2, which movement would represent an improvement for all individuals?

Accepted Answer

A) A to B 
B) C to AC 
C) D to B 
D) A to D 
A) A to B 
B) C to AC 
C) D to B 
D) A to D

Question 11

Higher prices can discourage use/consumption, which in turn may better allocate scarce resources.

Accepted Answer

A) True 
 B)False

Question 12

Any increase in efficiency increases output available for distribution.

Accepted Answer

A) True 
 B)False

Question 13

Central planning systems were used in the former Soviet Union but since this union dissolved no other nations now use this allocation process.

Accepted Answer

A) True 
 B)False

Question 14

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

Accepted Answer

The price mechanism solves the distribut

Question 15

The free-market system coordinates output decisions by pushing

Accepted Answer

A) up price when there is a shortage. 
B) down price when quantity demanded exceeds quantity supplied. 
C) up price when there is a surplus. 
D) up price when quantity supplied exceeds quantity demanded. 
A) up price when there is a shortage. 
B) down price when quantity demanded exceeds quantity supplied. 
C) up price when there is a surplus. 
D) up price when quantity supplied exceeds quantity demanded.

Question 16

The metaphor used to describe the working of the price system to achieve efficiency in a free market is

Accepted Answer

A) Occam's razor. 
B) the prisoner's dilemma. 
C) the invisible hand. 
D) the benefit principle. 
A) Occam's razor. 
B) the prisoner's dilemma. 
C) the invisible hand. 
D) the benefit principle.

Question 17

The necessity for choice, in economics, arises from

Accepted Answer

A) high incomes and many available goods. 
B) scarcity of economic means for satisfying economic wants. 
C) limited numbers of producers. 
D) All of the responses are correct. 
A) high incomes and many available goods. 
B) scarcity of economic means for satisfying economic wants. 
C) limited numbers of producers. 
D) All of the responses are correct.

Question 18

Under laissez-faire, the force that drives the economy toward an efficient outcome is

Accepted Answer

A) central planning. 
B) majority voting. 
C) the pursuit of self-interest. 
D) altruism. 
A) central planning. 
B) majority voting. 
C) the pursuit of self-interest. 
D) altruism.

Question 19

What is the rule for efficient output selection and how does the competitive market achieve it?

Accepted Answer

The rule is MC = MU.In competition, MC =

Question 20

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.

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

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

"Peak pricing" can often improve economic efficiency.

Perfect central planning is nearly impossible for all of these reasons except

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

Under laissez-faire, the allocation of resources among different products depends on

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

In the case of the production of electronic calculators, introduced in the United States in the 1960s,

In a competitive market economy, a resource in short supply will be allocated

Figure 11-2 ​ -In Figure 11-2, which movement would represent an improvement for all individuals?

Higher prices can discourage use/consumption, which in turn may better allocate scarce resources.

Any increase in efficiency increases output available for distribution.

Central planning systems were used in the former Soviet Union but since this union dissolved no other nations now use this allocation process.

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

The free-market system coordinates output decisions by pushing

The metaphor used to describe the working of the price system to achieve efficiency in a free market is

The necessity for choice, in economics, arises from

Under laissez-faire, the force that drives the economy toward an efficient outcome is

What is the rule for efficient output selection and how does the competitive market achieve it?

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

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 -In Figure 11-2, which movement would represent an improvement for all individuals?