Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A consumer who buys any amount of a good will realize a positive consumer's surplus from that good.

Accepted Answer

A) True 
 B)False

Question 3

The distribution process performed by the price system is not as efficient as the distribution process of central planners.

Accepted Answer

A) True 
 B)False

Question 4

Mutually beneficial trade is impossible when different persons have different preferences about goods and services.

Accepted Answer

A) True 
 B)False

Question 5

Total surplus is

Accepted Answer

A) the sum of consumer's surplus plus producer's surplus. 
B) the consumer's surplus minus the producer's surplus. 
C) the product price minus the sum of consumer's surplus and producer's surplus. 
D) consumer surplus minus marginal utility of the produce. 
A) the sum of consumer's surplus plus producer's surplus. 
B) the consumer's surplus minus the producer's surplus. 
C) the product price minus the sum of consumer's surplus and producer's surplus. 
D) consumer surplus minus marginal utility of the produce.

Question 6

When box lunches are handed out at an elementary school, Jimmy (who loves chocolate and hates raisins)gets a raisin cookie and Johnny (who hates chocolate and loves raisins)gets a chocolate chip cookie. 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.

Question 7

It is true that the distribution process carried out by the price system

Accepted Answer

A) accomplishes the task more efficiently than central planners would. 
B) favors the rich. 
C) is superior to other rationing mechanisms because it is able to pay attention to individual consumer preferences. 
D) All of these responses are true. 
A) accomplishes the task more efficiently than central planners would. 
B) favors the rich. 
C) is superior to other rationing mechanisms because it is able to pay attention to individual consumer preferences. 
D) All of these responses are true.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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.

Question 10

In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by

Accepted Answer

A) the government. 
B) businessmen. 
C) the price system. 
D) workers. 
A) the government. 
B) businessmen. 
C) the price system. 
D) workers.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Figure 11-2 ​
 
As we move down the production possibilities schedule in Figure 11-2, each successive point is

Accepted Answer

A) less efficient. 
B) more efficient. 
C) equally efficient. 
D) more or less efficient; we cannot tell which. 
A) less efficient. 
B) more efficient. 
C) equally efficient. 
D) more or less efficient; we cannot tell which.

Question 13

Production planning without the market mechanism is very efficiently handled by central planners.

Accepted Answer

A) True 
 B)False

Question 14

Prices

Accepted Answer

A) solve the problem of distribution of products among consumers. 
B) act as rationing devices. 
C) under laissez-faire produce an efficient allocation of resources. 
D) do all of the things listed here. 
A) solve the problem of distribution of products among consumers. 
B) act as rationing devices. 
C) under laissez-faire produce an efficient allocation of resources. 
D) do all of the things listed here.

Question 15

Efficiency in the choice of outputs requires that marginal cost be equal to marginal revenue and nothing else.

Accepted Answer

A) True 
 B)False

Question 16

In a free market, economic activity is coordinated by

Accepted Answer

A) central planners. 
B) prices. 
C) costs. 
D) majority rule. 
A) central planners. 
B) prices. 
C) costs. 
D) majority rule.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) output selection. 
B) production planning. 
C) distribution. 
D) market segmentation. 
A) output selection. 
B) production planning. 
C) distribution. 
D) market segmentation.

Question 19

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 20

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.

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

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

A consumer who buys any amount of a good will realize a positive consumer's surplus from that good.

The distribution process performed by the price system is not as efficient as the distribution process of central planners.

Mutually beneficial trade is impossible when different persons have different preferences about goods and services.

Total surplus is

When box lunches are handed out at an elementary school, Jimmy (who loves chocolate and hates raisins)gets a raisin cookie and Johnny (who hates chocolate and loves raisins)gets a chocolate chip cookie. This is an example of inefficiency in

It is true that the distribution process carried out by the price system

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

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

In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by

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

Figure 11-2 ​ As we move down the production possibilities schedule in Figure 11-2, each successive point is

Production planning without the market mechanism is very efficiently handled by central planners.

Prices

Efficiency in the choice of outputs requires that marginal cost be equal to marginal revenue and nothing else.

In a free market, economic activity is coordinated by

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

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

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

Prohibiting price increases in situations of true scarcity

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

Figure 11-2 As we move down the production possibilities schedule in Figure 11-2, each successive point is