Question 1

For any combination or outputs, there is an efficient allocation of income.

Accepted Answer

A) True 
 B)False

Question 2

Price decreases always increase economic efficiency.

Accepted Answer

A) True 
 B)False

Question 3

The price system is sometimes criticized in that it

Accepted Answer

A) leads to greater efficiency. 
B) results in allowing the rich get a disproportionate say in what goods and services are produced. 
C) coordinates activities without the need for planning by government agencies. 
D) relies too heavily on input-output analysis. 
A) leads to greater efficiency. 
B) results in allowing the rich get a disproportionate say in what goods and services are produced. 
C) coordinates activities without the need for planning by government agencies. 
D) relies too heavily on input-output analysis.

Question 4

When prices of products are set below equilibrium,

Accepted Answer

A) society's resources are inefficiently allocated. 
B) firms expand output to increase profits. 
C) firms earn excessively high profits. 
D) consumers benefit from surpluses of cheap goods. 
A) society's resources are inefficiently allocated. 
B) firms expand output to increase profits. 
C) firms earn excessively high profits. 
D) consumers benefit from surpluses of cheap goods.

Question 5

Input-output analysis is commonly used in production decisions.

Accepted Answer

A) True 
 B)False

Question 6

Politicians always agree with economists about the most efficient way of doing things.

Accepted Answer

A) True 
 B)False

Question 7

If the MU of half gallon of milk is $3.50 and the MU of gallon of milk is $3.25, and they both sell for the same price, we would expect consumers to

Accepted Answer

A) increase their purchases of gallons of milk. 
B) increase their purchases of half gallons of milk. 
C) not change their purchasing habits. 
D) buy only gallons of milk. 
A) increase their purchases of gallons of milk. 
B) increase their purchases of half gallons of milk. 
C) not change their purchasing habits. 
D) buy only gallons of milk.

Question 8

The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will lower total surplus.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

The saying "the lower the price, the better" may not always be correct for an economy's public interest because

Accepted Answer

A) people should have to pay for what they want. 
B) people will overuse something they perceive as being cheaper than the utility they receive for it. 
C) the government can no longer afford to provide all the goods and services it provides because it is slowly going broke. 
D) cheaper prices will make people buy less of other things. 
A) people should have to pay for what they want. 
B) people will overuse something they perceive as being cheaper than the utility they receive for it. 
C) the government can no longer afford to provide all the goods and services it provides because it is slowly going broke. 
D) cheaper prices will make people buy less of other things.

Question 12

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 13

The price system takes into account consumer preferences in the distribution of goods and services.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) it takes too much energy to coordinate activities. 
B) efficient outcomes may not be compatible with their ideas of a fair distribution. 
C) a few people can control all economic activity. 
D) it fosters high rents and low beef prices. 
A) it takes too much energy to coordinate activities. 
B) efficient outcomes may not be compatible with their ideas of a fair distribution. 
C) a few people can control all economic activity. 
D) it fosters high rents and low beef prices.

Question 15

The assignment of inputs to specific industries by central planners is made difficult by

Accepted Answer

A) the interdependency among industries. 
B) lack of data for decision making. 
C) the danger of a chain reaction among industries if an error is made at any point. 
D) All of the responses are correct. 
A) the interdependency among industries. 
B) lack of data for decision making. 
C) the danger of a chain reaction among industries if an error is made at any point. 
D) All of the responses are correct.

Question 16

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 17

An unplanned economy operating under laissez-faire

Accepted Answer

A) allocates resources by market supply and demand. 
B) cannot respond to basic questions about production and distribution. 
C) shows breakdowns with frequent surpluses and shortages. 
D) allocates goods and services under government subsidy. 
A) allocates resources by market supply and demand. 
B) cannot respond to basic questions about production and distribution. 
C) shows breakdowns with frequent surpluses and shortages. 
D) allocates goods and services under government subsidy.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Under a laissez-faire system,

Accepted Answer

A) government coordinates with firms to determine output and prices for goods and services. 
B) input-output analysis is used by planning agencies to determine output levels. 
C) the demand and supply process determines output and prices of goods and services. 
D) firms coordinate with each other to determine output and price levels for goods and services. 
A) government coordinates with firms to determine output and prices for goods and services. 
B) input-output analysis is used by planning agencies to determine output levels. 
C) the demand and supply process determines output and prices of goods and services. 
D) firms coordinate with each other to determine output and price levels for goods and services.

Question 20

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

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

For any combination or outputs, there is an efficient allocation of income.

Price decreases always increase economic efficiency.

The price system is sometimes criticized in that it

When prices of products are set below equilibrium,

Input-output analysis is commonly used in production decisions.

Politicians always agree with economists about the most efficient way of doing things.

If the MU of half gallon of milk is $3.50 and the MU of gallon of milk is $3.25, and they both sell for the same price, we would expect consumers to

The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will lower total surplus.

The necessity for choice, in economics, arises from

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

The saying "the lower the price, the better" may not always be correct for an economy's public interest because

Using prices to promote efficiency in the utilization of bridges,

The price system takes into account consumer preferences in the distribution of goods and services.

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

The assignment of inputs to specific industries by central planners is made difficult by

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

An unplanned economy operating under laissez-faire

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

Under a laissez-faire system,

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

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