Question 1

The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.

Accepted Answer

Efficiency in output selection requires

Question 2

An efficient distribution of goods requires that

Accepted Answer

A) everyone gets an equal share of each good. 
B) marginal cost equal marginal utility for the last unit produced. 
C) each person derives the same total utility from the good. 
D) since tastes differ, every person pays a different price in accordance with different marginal utilities. 
A) everyone gets an equal share of each good. 
B) marginal cost equal marginal utility for the last unit produced. 
C) each person derives the same total utility from the good. 
D) since tastes differ, every person pays a different price in accordance with different marginal utilities.

Question 3

Higher prices may serve the public interest when

Accepted Answer

A) there is a shortage of goods or services available. 
B) there is an equal distribution of traffic on alternate routes. 
C) higher prices never serve the public interest. 
D) lower prices signal scarcity. 
A) there is a shortage of goods or services available. 
B) there is an equal distribution of traffic on alternate routes. 
C) higher prices never serve the public interest. 
D) lower prices signal scarcity.

Question 4

If arrival and departure delays are frequent early in the morning and late afternoons, but there are no delays during the evening hours, we can conclude that the airport authority

Accepted Answer

A) charges high landing fees at common departure and arrival times. 
B) is concerned about the delay times. 
C) is charging uniform landing fees throughout the day 
D) should reduce the number of flights during the busy times. 
A) charges high landing fees at common departure and arrival times. 
B) is concerned about the delay times. 
C) is charging uniform landing fees throughout the day 
D) should reduce the number of flights during the busy times.

Question 5

What makes production planning a daunting task for central planners?

Accepted Answer

Because the output required from any one

Question 6

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

Question 7

To efficiently manage traffic on a system of bridges,

Accepted Answer

A) the more-crowded bridges should have lower tolls, so that they are affordable. 
B) the tolls should be equal for all bridges, so that people can choose the most convenient routes. 
C) tolls should be higher on more-crowded bridges and lower on less-crowded bridges. 
D) there should be no tolls on bridges, because people should not have to pay to drive to their jobs. 
A) the more-crowded bridges should have lower tolls, so that they are affordable. 
B) the tolls should be equal for all bridges, so that people can choose the most convenient routes. 
C) tolls should be higher on more-crowded bridges and lower on less-crowded bridges. 
D) there should be no tolls on bridges, because people should not have to pay to drive to their jobs.

Question 8

Command economies strictly rely on sophisticated input-output analysis to allocate resources.

Accepted Answer

A) True 
 B)False

Question 9

Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.

Accepted Answer

Yes. Economic efficiency requires that p

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

Under laissez-faire, output selection is determined by

Accepted Answer

A) consumer preferences. 
B) production costs. 
C) firms' desires to make profits. 
D) All of the responses are correct. 
A) consumer preferences. 
B) production costs. 
C) firms' desires to make profits. 
D) All of the responses are correct.

Question 13

"Peak" pricing can best be defined as

Accepted Answer

A) setting higher prices to reflect higher demand. 
B) pricing to obtain maximum profit. 
C) setting price higher when demand is more elastic. 
D) raising price to determine elasticity. 
A) setting higher prices to reflect higher demand. 
B) pricing to obtain maximum profit. 
C) setting price higher when demand is more elastic. 
D) raising price to determine elasticity.

Question 14

If the marginal utility of a gallon of milk to consumers is $2.50 and the MC of producing the gallon of milk is $1.50, then

Accepted Answer

A) the value of the resources used up in producing one more gallon of milk would be $1 less than the money value of the additional gallon to consumers. 
B) society could be made better off by expanding the output of milk. 
C) resources are not being used most efficiently. 
D) All of the above are true. 
A) the value of the resources used up in producing one more gallon of milk would be $1 less than the money value of the additional gallon to consumers. 
B) society could be made better off by expanding the output of milk. 
C) resources are not being used most efficiently. 
D) All of the above are true.

Question 15

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 16

Efficiency in output requires which of the following?

Accepted Answer

A) MC = MRP 
B) MC = MFC 
C) MC = MU 
D) MC = AVC 
A) MC = MRP 
B) MC = MFC 
C) MC = MU 
D) MC = AVC

Question 17

After the Arab oil embargoes, there was concern about the impact of higher gas prices on the low-income worker. The government imposed price controls on oil to protect the poor from this situation. Explain the inefficiency of this price ceiling and how taxes, rather than prices, could be used to solve the problem.

Accepted Answer

By preventing the price of gas from risi

Question 18

If both the MU and MC of flower pots is $1.50 and the MU and MC of coffee cups is $2, then economic efficiency would require

Accepted Answer

A) increased production of flower pots. 
B) increased production of coffee cups. 
C) the price of coffee cups to exceed the price of flower pots. 
D) the price of flower pots to exceed the price of coffee cups. 
A) increased production of flower pots. 
B) increased production of coffee cups. 
C) the price of coffee cups to exceed the price of flower pots. 
D) the price of flower pots to exceed the price of coffee cups.

Question 19

What is the order in which an economy tries to solve the issue of resource allocation?

Accepted Answer

A) Production planning, distribution, and output selection 
B) Output selection, production planning, and distribution 
C) Production planning, output selection, and distribution 
D) Distribution, production planning, and output selection 
A) Production planning, distribution, and output selection 
B) Output selection, production planning, and distribution 
C) Production planning, output selection, and distribution 
D) Distribution, production planning, and output selection

Question 20

Some years ago New York City imposed rent controls in an effort to provide housing at "fair" prices for as many people as possible. The result was a serious shortage of housing and deterioration of existing rental properties. How would an economist have described the result in terms of economic efficiency?

Accepted Answer

Keeping the prices low discouraged the c

The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.

An efficient distribution of goods requires that

Higher prices may serve the public interest when

If arrival and departure delays are frequent early in the morning and late afternoons, but there are no delays during the evening hours, we can conclude that the airport authority

What makes production planning a daunting task for central planners?

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.

To efficiently manage traffic on a system of bridges,

Command economies strictly rely on sophisticated input-output analysis to allocate resources.

Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.

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

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

Under laissez-faire, output selection is determined by

"Peak" pricing can best be defined as

If the marginal utility of a gallon of milk to consumers is $2.50 and the MC of producing the gallon of milk is $1.50, then

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

Efficiency in output requires which of the following?

If both the MU and MC of flower pots is $1.50 and the MU and MC of coffee cups is $2, then economic efficiency would require

What is the order in which an economy tries to solve the issue of resource allocation?

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

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

The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.

An efficient distribution of goods requires that

Higher prices may serve the public interest when

If arrival and departure delays are frequent early in the morning and late afternoons, but there are no delays during the evening hours, we can conclude that the airport authority

What makes production planning a daunting task for central planners?

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.

To efficiently manage traffic on a system of bridges,

Command economies strictly rely on sophisticated input-output analysis to allocate resources.

Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.

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

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

Under laissez-faire, output selection is determined by

"Peak" pricing can best be defined as

If the marginal utility of a gallon of milk to consumers is $2.50 and the MC of producing the gallon of milk is $1.50, then

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

Efficiency in output requires which of the following?

If both the MU and MC of flower pots is $1.50 and the MU and MC of coffee cups is $2, then economic efficiency would require

What is the order in which an economy tries to solve the issue of resource allocation?

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