Question 1

Goods are distributed efficiently if everyone gets an equal share of each good.

Accepted Answer

A) True 
 B)False

Question 2

Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as "fairer."

Accepted Answer

A) True 
 B)False

Question 3

Input-output analysis is rarely used because

Accepted Answer

A) it requires tremendously complex calculations. 
B) it requires large amounts of data. 
C) market economies can instead rely on the price mechanism to organize production. 
D) All of the responses are correct. 
A) it requires tremendously complex calculations. 
B) it requires large amounts of data. 
C) market economies can instead rely on the price mechanism to organize production. 
D) All of the responses are correct.

Question 4

The slope of a typical production possibilities frontier reflects the fact that

Accepted Answer

A) some systems of market organization are more efficient than others. 
B) the invisible hand always functions smoothly in a market system without government intervention. 
C) when resources are allocated efficiently, it's impossible to produce more of anything without producing less of something else. 
D) production is only possible when resources are allocated efficiently. 
A) some systems of market organization are more efficient than others. 
B) the invisible hand always functions smoothly in a market system without government intervention. 
C) when resources are allocated efficiently, it's impossible to produce more of anything without producing less of something else. 
D) production is only possible when resources are allocated efficiently.

Question 5

Prices set too low can actually be against the public interest.

Accepted Answer

A) True 
 B)False

Question 6

The coordination task of any economy that answers the question of how output shall be divided among consumers may best be described as

Accepted Answer

A) output selection. 
B) production planning. 
C) distribution. 
D) input-output analysis. 
A) output selection. 
B) production planning. 
C) distribution. 
D) input-output analysis.

Question 7

An efficient allocation of resources is demonstrated by a point

Accepted Answer

A) above the production possibilities frontier. 
B) below the production possibilities frontier. 
C) on the production possibilities frontier. 
D) near the middle of the production possibilities frontier. 
A) above the production possibilities frontier. 
B) below the production possibilities frontier. 
C) on the production possibilities frontier. 
D) near the middle of the production possibilities frontier.

Question 8

Scarcity limits the volume of goods that an economic system can produce but does not limit the production of services.

Accepted Answer

A) True 
 B)False

Question 9

Prices influence the distribution of income by making the distribution fairer.

Accepted Answer

A) True 
 B)False

Question 10

Under a laissez-faire system,

Accepted Answer

A) government organizes production and distribution of goods. 
B) a small bureaucracy of central planners tells firms what to produce and how to produce it. 
C) costs of production and consumers' demands determine the output mix. 
D) firms try to produce the goods that they think are good for consumers. 
A) government organizes production and distribution of goods. 
B) a small bureaucracy of central planners tells firms what to produce and how to produce it. 
C) costs of production and consumers' demands determine the output mix. 
D) firms try to produce the goods that they think are good for consumers.

Question 11

Using prices to promote efficiency in the utilization of bridges,

Accepted Answer

A) higher prices should be charged for the use of the most crowded bridges. 
B) lower prices should be charged for the use of the uncrowded bridges. 
C) traffic would be equalized among the bridges where space is a scarce resource. 
D) All of the responses are correct. 
A) higher prices should be charged for the use of the most crowded bridges. 
B) lower prices should be charged for the use of the uncrowded bridges. 
C) traffic would be equalized among the bridges where space is a scarce resource. 
D) All of the responses are correct.

Question 12

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

Accepted Answer

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

Question 13

In order for a central planner to achieve the invisible-hand type efficiency of a free market, the planner would

Accepted Answer

A) need masses of statistics. 
B) be required to makes enormous calculations. 
C) need to be able to measure a consumer's marginal utility in order to equate MU with MC. 
D) All of the above would be required. 
A) need masses of statistics. 
B) be required to makes enormous calculations. 
C) need to be able to measure a consumer's marginal utility in order to equate MU with MC. 
D) All of the above would be required.

Question 14

The idea of the invisible hand was introduced by

Accepted Answer

A) Wassily Leontief. 
B) Adam Smith. 
C) Thomas Jefferson. 
D) Mountifort Longfield. 
A) Wassily Leontief. 
B) Adam Smith. 
C) Thomas Jefferson. 
D) Mountifort Longfield.

Question 15

In a market system, the primary instruments used to coordinate economic activity are

Accepted Answer

A) plans. 
B) prices. 
C) input-output analyses. 
D) quantities. 
A) plans. 
B) prices. 
C) input-output analyses. 
D) quantities.

Question 16

Marxists and leaders of communist economies actually often admire the market mechanism for its

Accepted Answer

A) efficiency in allocation of resources. 
B) fairness in distribution of output. 
C) maximization of net benefits for consumers. 
D) effectiveness in achieving high rates of growth. 
A) efficiency in allocation of resources. 
B) fairness in distribution of output. 
C) maximization of net benefits for consumers. 
D) effectiveness in achieving high rates of growth.

Question 17

MC and MU are set equal to one another in a market economy because

Accepted Answer

A) producers and consumers are free to communicate with one another. 
B) producers and consumers both respond to the same price. 
C) consumers must accept the prices set by producers. 
D) producers must accept the price set by consumers. 
A) producers and consumers are free to communicate with one another. 
B) producers and consumers both respond to the same price. 
C) consumers must accept the prices set by producers. 
D) producers must accept the price set by consumers.

Question 18

Uncoordinated decisions in perfect competition lead to mass confusion and inefficiency.

Accepted Answer

A) True 
 B)False

Question 19

Any increase in efficiency increases only profits of producers, with no increase in output.

Accepted Answer

A) True 
 B)False

Question 20

Economics tells us which resource allocations are preferable.

Accepted Answer

A) True 
 B)False

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

Goods are distributed efficiently if everyone gets an equal share of each good.

Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as "fairer."

Input-output analysis is rarely used because

The slope of a typical production possibilities frontier reflects the fact that

Prices set too low can actually be against the public interest.

The coordination task of any economy that answers the question of how output shall be divided among consumers may best be described as

An efficient allocation of resources is demonstrated by a point

Scarcity limits the volume of goods that an economic system can produce but does not limit the production of services.

Prices influence the distribution of income by making the distribution fairer.

Under a laissez-faire system,

Using prices to promote efficiency in the utilization of bridges,

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

In order for a central planner to achieve the invisible-hand type efficiency of a free market, the planner would

The idea of the invisible hand was introduced by

In a market system, the primary instruments used to coordinate economic activity are

Marxists and leaders of communist economies actually often admire the market mechanism for its

MC and MU are set equal to one another in a market economy because

Uncoordinated decisions in perfect competition lead to mass confusion and inefficiency.

Any increase in efficiency increases only profits of producers, with no increase in output.

Economics tells us which resource allocations are preferable.

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 cost-reducing technological breakthrough in calculator production would cause which movement?