Question 1

It is in society's best interest that the MC of the last unit produced of a good is equal to its MU.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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

Accepted Answer

A) True 
 B)False

Question 4

"Peak pricing" can often improve economic efficiency.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Under perfect competition, the market mechanism, without any government regulation, is capable of

Accepted Answer

A) allocating resources efficiently. 
B) solving equity problems. 
C) making the average cost of labor equal to the average cost of all commodities. 
D) making more income available to the poor. 
A) allocating resources efficiently. 
B) solving equity problems. 
C) making the average cost of labor equal to the average cost of all commodities. 
D) making more income available to the poor.

Question 7

Which type of economic system will produce the highest degree of allocative efficiency?

Accepted Answer

A) A perfectly competitive market system 
B) A purely command economic system 
C) A market system with limited price controls and price ceilings 
D) A command system with limited market activity for nonessentials 
A) A perfectly competitive market system 
B) A purely command economic system 
C) A market system with limited price controls and price ceilings 
D) A command system with limited market activity for nonessentials

Question 8

Free markets produce allocatively efficient outcomes and have no flaws.

Accepted Answer

A) True 
 B)False

Question 9

Economists favor the use of peak-load pricing since it can

Accepted Answer

A) improve the equity of the distribution of income. 
B) enhance the efficiency in the use of scarce resources. 
C) improve the profit levels of corporations. 
D) result in lower levels of pollution. 
A) improve the equity of the distribution of income. 
B) enhance the efficiency in the use of scarce resources. 
C) improve the profit levels of corporations. 
D) result in lower levels of pollution.

Question 10

Differentiate between consumer's surplus and producer's surplus. For a rational consumer, consumer's surplus will never be a negative number. Why?

Accepted Answer

The consumer's surplus from a purchase i

Question 11

Figure 11-3 
​ 
   
In Figure 11-3, if person 1 and person 2 have the indicated quantities of cheese and crackers and are on the indicated indifference curves, is there the possibility of mutually beneficial trade? Explain.

Accepted Answer

Yes. For person 1, the marginal utility

Question 12

In the case of the production of electronic calculators, introduced in the United States in the 1960s,

Accepted Answer

A) a technological breakthrough reduced the input quantities needed to produce them. 
B) quantity demanded increased significantly as prices fell. 
C) production costs fell with advances in technology. 
D) All of the responses are correct. 
A) a technological breakthrough reduced the input quantities needed to produce them. 
B) quantity demanded increased significantly as prices fell. 
C) production costs fell with advances in technology. 
D) All of the responses are correct.

Question 13

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes. No corresponding factory produces only right shoes. This outcome 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 14

Which nation listed below is successfully transitioning from a planned economy to a hybrid market economy?

Accepted Answer

A) People's Republic of China 
B) Japan 
C) United Kingdom 
D) United States 
A) People's Republic of China 
B) Japan 
C) United Kingdom 
D) United States

Question 15

Laissez-faire is a policy that espouses central planning.

Accepted Answer

A) True 
 B)False

Question 16

Input-output analysis is a technique used to solve complicated market equations.

Accepted Answer

A) True 
 B)False

Question 17

To promote economic efficiency, government should

Accepted Answer

A) keep all prices as low as possible. 
B) keep all prices high so that people will save more money. 
C) allow the market to set low prices for abundant goods and high prices for scarce goods. 
D) never interfere with firms' price setting powers. 
A) keep all prices as low as possible. 
B) keep all prices high so that people will save more money. 
C) allow the market to set low prices for abundant goods and high prices for scarce goods. 
D) never interfere with firms' price setting powers.

Question 18

Higher efficiency in the economy can be reached if prices are held low by law.

Accepted Answer

A) True 
 B)False

Question 19

Inefficient allocation of resources occurs when

Accepted Answer

A) no one can be made better off without having someone else give up something. 
B) it is possible to make some people better off without making others worse off. 
C) society is operating at a point high on the production possibilities frontier. 
D) society is operating at a point low on the production possibilities frontier. 
A) no one can be made better off without having someone else give up something. 
B) it is possible to make some people better off without making others worse off. 
C) society is operating at a point high on the production possibilities frontier. 
D) society is operating at a point low on the production possibilities frontier.

Question 20

Laissez-faire refers to a program of minimal interference in the market system.

Accepted Answer

A) True 
 B)False

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

It is in society's best interest that the MC of the last unit produced of a good is equal to its MU.

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

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

"Peak pricing" can often improve economic efficiency.

Input-output analysis is rarely used because

Under perfect competition, the market mechanism, without any government regulation, is capable of

Which type of economic system will produce the highest degree of allocative efficiency?

Free markets produce allocatively efficient outcomes and have no flaws.

Economists favor the use of peak-load pricing since it can

Differentiate between consumer's surplus and producer's surplus. For a rational consumer, consumer's surplus will never be a negative number. Why?

Figure 11-3 ​ In Figure 11-3, if person 1 and person 2 have the indicated quantities of cheese and crackers and are on the indicated indifference curves, is there the possibility of mutually beneficial trade? Explain.

In the case of the production of electronic calculators, introduced in the United States in the 1960s,

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes. No corresponding factory produces only right shoes. This outcome is an example of inefficiency in

Which nation listed below is successfully transitioning from a planned economy to a hybrid market economy?

Laissez-faire is a policy that espouses central planning.

Input-output analysis is a technique used to solve complicated market equations.

To promote economic efficiency, government should

Higher efficiency in the economy can be reached if prices are held low by law.

Inefficient allocation of resources occurs when

Laissez-faire refers to a program of minimal interference in the market system.

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 11-3 In Figure 11-3, if person 1 and person 2 have the indicated quantities of cheese and crackers and are on the indicated indifference curves, is there the possibility of mutually beneficial trade? Explain.