Question 1

Total surplus is in which type of market will be highest?

Accepted Answer

A) Perfect competition 
B) Monopoly 
C) Equally in perfect competition and monopoly 
D) Natural monopoly 
A) Perfect competition 
B) Monopoly 
C) Equally in perfect competition and monopoly 
D) Natural monopoly

Question 2

A weakness of the price system is that it completely fails to take account consumer preferences in the distribution of goods and services.

Accepted Answer

A) True 
 B)False

Question 3

In order for the price system to have satisfied the exacting requirements for efficiency,

Accepted Answer

A) MU must equal MC for each and every commodity. 
B) the average cost of producing each good must be equal to its MU. 
C) the maximum possible of total economic profit must be produced. 
D) every consumer's MU will be equal to marginal physical product. 
A) MU must equal MC for each and every commodity. 
B) the average cost of producing each good must be equal to its MU. 
C) the maximum possible of total economic profit must be produced. 
D) every consumer's MU will be equal to marginal physical product.

Question 4

Prohibiting price increases in situations of true scarcity

Accepted Answer

A) prevents the market mechanism from reallocating resources more efficiently. 
B) discourages production. 
C) may lead to extreme shortages of vitally needed products. 
D) All of the responses are correct. 
A) prevents the market mechanism from reallocating resources more efficiently. 
B) discourages production. 
C) may lead to extreme shortages of vitally needed products. 
D) All of the responses are correct.

Question 5

If a production possibilities frontier is a downward sloping straight line, it

Accepted Answer

A) shows that there are no trade-offs in the production process. 
B) shows that resources are not efficiently allocated 
C) shows that production on the frontier implies that it is not possible to produce more of anything without producing less of something else. 
D) shows that resources are unemployed. 
A) shows that there are no trade-offs in the production process. 
B) shows that resources are not efficiently allocated 
C) shows that production on the frontier implies that it is not possible to produce more of anything without producing less of something else. 
D) shows that resources are unemployed.

Question 6

If the marginal cost of producing steel exceeds the marginal utility of using steel, then for economic efficiency,

Accepted Answer

A) the price of steel should fall. 
B) society should produce less steel. 
C) the price of goods made with steel should fall. 
D) society should direct resources toward steel production and away from the production of other goods. 
A) the price of steel should fall. 
B) society should produce less steel. 
C) the price of goods made with steel should fall. 
D) society should direct resources toward steel production and away from the production of other goods.

Question 7

The issue of fairness versus efficiency arises

Accepted Answer

A) only in a command economy. 
B) only in a market economy. 
C) in neither a command nor a market economy. 
D) in both a command and a market economy. 
A) only in a command economy. 
B) only in a market economy. 
C) in neither a command nor a market economy. 
D) in both a command and a market economy.

Question 8

Division of iron ore between the production of bridge girders and tanker drums is an example of

Accepted Answer

A) a distribution problem. 
B) production planning. 
C) input-output analysis. 
D) both output selection and distribution. 
A) a distribution problem. 
B) production planning. 
C) input-output analysis. 
D) both output selection and distribution.

Question 9

The degree to which an economic system approaches a market economy depends on the degree to which

Accepted Answer

A) economic choices are made through the free interaction of buyers and sellers in the marketplace. 
B) there are monopolies in the marketplace. 
C) people have a high standard of living. 
D) advanced technology is used. 
A) economic choices are made through the free interaction of buyers and sellers in the marketplace. 
B) there are monopolies in the marketplace. 
C) people have a high standard of living. 
D) advanced technology is used.

Question 10

The laissez-faire free-market system is

Accepted Answer

A) an ideal of perfection. 
B) one that leaves no room for improvement. 
C) unmatched by any other system for allocative efficiency. 
D) All of the responses are correct. 
A) an ideal of perfection. 
B) one that leaves no room for improvement. 
C) unmatched by any other system for allocative efficiency. 
D) All of the responses are correct.

Question 11

Economists believe having higher prices for scarcer resources promotes efficiency.

Accepted Answer

A) True 
 B)False

Question 12

Prices can work to benefit the public interest by

Accepted Answer

A) raising corporate profit levels. 
B) improving the fairness of the distribution of income. 
C) allowing government to regulate the economy. 
D) allocating scarce resources to those who value the resource the most. 
A) raising corporate profit levels. 
B) improving the fairness of the distribution of income. 
C) allowing government to regulate the economy. 
D) allocating scarce resources to those who value the resource the most.

Question 13

In a laissez-faire economy, the price system plays a key role in

Accepted Answer

A) selecting outputs. 
B) selecting inputs. 
C) distributing outputs. 
D) All of the responses are correct. 
A) selecting outputs. 
B) selecting inputs. 
C) distributing outputs. 
D) All of the responses are correct.

Question 14

Each point on a production possibilities frontier represents an efficient allocation of resources in an economy at one point in time.

Accepted Answer

A) True 
 B)False

Question 15

Prohibiting price increases in situations of true scarcity could best be described as

Accepted Answer

A) interfering with the "law" of supply and demand. 
B) thwarting the "law" of increasing returns to scale. 
C) violating the "law" of increasing cost. 
D) interfering with the "law" of diminishing marginal utility. 
A) interfering with the "law" of supply and demand. 
B) thwarting the "law" of increasing returns to scale. 
C) violating the "law" of increasing cost. 
D) interfering with the "law" of diminishing marginal utility.

Question 16

To equalize traffic on transportation routes, a pricing arrangement called "peak, off-peak pricing" would most likely be proposed by

Accepted Answer

A) economists. 
B) politicians. 
C) regulators. 
D) the general public. 
A) economists. 
B) politicians. 
C) regulators. 
D) the general public.

Question 17

Under a system of laissez-faire, output selection is determined by consumers' wants.

Accepted Answer

A) True 
 B)False

Question 18

Figure 11-1
​  
-In Figure 11-1, a change in consumer tastes favoring calculators will lead to which movement?

Accepted Answer

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

Question 19

The government's role in a laissez-faire system includes

Accepted Answer

A) determining market prices 
B) constructing and maintaining roads and infrastructure 
C) determine the levels of profits earned by firms 
D) impose minimum wages 
A) determining market prices 
B) constructing and maintaining roads and infrastructure 
C) determine the levels of profits earned by firms 
D) impose minimum wages

Question 20

At the equilibrium point in a perfectly competitive industry, the total surplus (the sum of the consumer surplus and producer surplus) will be at its maximum.

Accepted Answer

A) True 
 B)False

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

Total surplus is in which type of market will be highest?

A weakness of the price system is that it completely fails to take account consumer preferences in the distribution of goods and services.

In order for the price system to have satisfied the exacting requirements for efficiency,

Prohibiting price increases in situations of true scarcity

If a production possibilities frontier is a downward sloping straight line, it

If the marginal cost of producing steel exceeds the marginal utility of using steel, then for economic efficiency,

The issue of fairness versus efficiency arises

Division of iron ore between the production of bridge girders and tanker drums is an example of

The degree to which an economic system approaches a market economy depends on the degree to which

The laissez-faire free-market system is

Economists believe having higher prices for scarcer resources promotes efficiency.

Prices can work to benefit the public interest by

In a laissez-faire economy, the price system plays a key role in

Each point on a production possibilities frontier represents an efficient allocation of resources in an economy at one point in time.

Prohibiting price increases in situations of true scarcity could best be described as

To equalize traffic on transportation routes, a pricing arrangement called "peak, off-peak pricing" would most likely be proposed by

Under a system of laissez-faire, output selection is determined by consumers' wants.

Figure 11-1 ​ -In Figure 11-1, a change in consumer tastes favoring calculators will lead to which movement?

The government's role in a laissez-faire system includes

At the equilibrium point in a perfectly competitive industry, the total surplus (the sum of the consumer surplus and producer surplus) will be at its maximum.

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 change in consumer tastes favoring calculators will lead to which movement?