Question 1

Price increases always reduce economic efficiency.

Accepted Answer

A) True 
 B)False

Question 2

The market allocates goods to individuals according to the individuals'

Accepted Answer

A) desire for the good. 
B) ability to pay for the good. 
C) desire and ability to pay for the good. 
D) political influence. 
A) desire for the good. 
B) ability to pay for the good. 
C) desire and ability to pay for the good. 
D) political influence.

Question 3

Economists can objectively evaluate the desirability of the distribution of income.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) Output selection 
B) Production planning 
C) Distribution 
D) Rationing 
A) Output selection 
B) Production planning 
C) Distribution 
D) Rationing

Question 5

Any increase in efficiency increases output available for distribution.

Accepted Answer

A) True 
 B)False

Question 6

An efficient solution to a pricing problem

Accepted Answer

A) makes both buyers and sellers better off than any other possible solution. 
B) may not be the socially "fair" solution. 
C) occurs when producers' total cost of production equals consumers' total utility from the output produced. 
D) maximizes the output of the good being priced. 
A) makes both buyers and sellers better off than any other possible solution. 
B) may not be the socially "fair" solution. 
C) occurs when producers' total cost of production equals consumers' total utility from the output produced. 
D) maximizes the output of the good being priced.

Question 7

How does a free-market system address the output selection task?

Accepted Answer

A free-market system decides what should

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

Accepted Answer

No. The market system, by itself, will t

Question 11

The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will only affect consumer's surplus and not producer's surplus.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The perfect competition price system is the most efficient because it equates MC = P = MU.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

Accepted Answer

A) Administered system 
B) Government 
C) Price system 
D) Central planning 
A) Administered system 
B) Government 
C) Price system 
D) Central planning

Question 16

An optimal allocation of resources is one which is

Accepted Answer

A) unfair. 
B) fair. 
C) efficient. 
D) inefficient. 
A) unfair. 
B) fair. 
C) efficient. 
D) inefficient.

Question 17

Centrally planned economies use free-market systems for their production planning.

Accepted Answer

A) True 
 B)False

Question 18

Under laissez-faire, the force that drives the economy toward an efficient outcome is

Accepted Answer

A) central planning. 
B) majority voting. 
C) the pursuit of self-interest. 
D) altruism. 
A) central planning. 
B) majority voting. 
C) the pursuit of self-interest. 
D) altruism.

Question 19

"Fair" outcomes and "efficient" outcomes are always identical.

Accepted Answer

A) True 
 B)False

Question 20

Define the following terms and explain why they are important in the study of economics. 
a. Efficient allocation 
b. Laissez-faire 
c. Peak pricing 
d. Input-output analysis 
e. Coordination tasks

Accepted Answer

a. An efficient allocation of resources

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

Price increases always reduce economic efficiency.

The market allocates goods to individuals according to the individuals'

Economists can objectively evaluate the desirability of the distribution of income.

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

Any increase in efficiency increases output available for distribution.

An efficient solution to a pricing problem

How does a free-market system address the output selection task?

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

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

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will only affect consumer's surplus and not producer's surplus.

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

The perfect competition price system is the most efficient because it equates MC = P = MU.

Under a laissez-faire system,

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

An optimal allocation of resources is one which is

Centrally planned economies use free-market systems for their production planning.

Under laissez-faire, the force that drives the economy toward an efficient outcome is

"Fair" outcomes and "efficient" outcomes are always identical.

Define the following terms and explain why they are important in the study of economics. a. Efficient allocation b. Laissez-faire c. Peak pricing d. Input-output analysis e. Coordination tasks

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

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