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

Production at points beyond the production possibilities frontier cannot be attained unless there is an increase in resources or an improvement in technology.

Free markets produce allocatively efficient outcomes and have no flaws.

The technique that addresses the problem of assigning inputs to specific industries is

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

Points below the production possibilities frontier are inefficient because it is possible to make someone better off without making anyone else worse off.

An economist would say the price is too high for a certain service if

In a market system, the working of the price system only results in the distribution of income.

When total surplus is maximized, then this implies that the output level will be produced where MC = MU.

Which nation listed below is successfully transitioning from a planned economy to a hybrid market economy?

Market systems can be evaluated as efficient or inefficient, but not as fair or unfair.

The existence of a universal law of scarcity creates pressures on societies to

Which central coordination task has claimed the most attention of central planners?

Higher prices may serve the public interest when

The market allocates goods to individuals according to the individuals'

Milk costs $2 and the last unit provides $4 in marginal utility.Cheese costs $4 and the last unit provides $2 in marginal utility.Is this an efficient allocation of resources? If so, why? If not, why not?

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

Under perfect competition, the lure of profits makes producers try to equate marginal cost and price.

There are only two people in the world (Adam and Eve) and only one good (apples).Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20.Which of the following statements must be true?

Many persons object to the results of the competitive market system because

An economy consists of two goods: beef and lamb.Of all the points on this economy's production possibilities frontier, which one is best in terms of efficiency?