Question 1

The MU of computers is initially larger than the MC of producing them in a free market. We may expect output of computers to

Accepted Answer

A) fall, MC to rise, and MU to rise. 
B) rise, MC to fall, and MU to fall. 
C) rise, MC to rise, and MU to fall. 
D) fall, MC to fall, and MU to rise. 
A) fall, MC to rise, and MU to rise. 
B) rise, MC to fall, and MU to fall. 
C) rise, MC to rise, and MU to fall. 
D) fall, MC to fall, and MU to rise.

Question 2

In a competitive market economy, a resource in short supply will be allocated

Accepted Answer

A) so that each firm gets enough to keep producing some portion of its output. 
B) according to how much each firm purchased before the shortage. 
C) to those firms that can make the most profitable use of it. 
D) by government fiat. 
A) so that each firm gets enough to keep producing some portion of its output. 
B) according to how much each firm purchased before the shortage. 
C) to those firms that can make the most profitable use of it. 
D) by government fiat.

Question 3

Figure 11-1 ​
 
In Figure 11-1, what can be concluded about the economy if production moves from Point D to Point A?

Accepted Answer

A) An improvement of calculator technology 
B) An increase in resources for producing other goods 
C) A reduction in the need for calculators in the economy 
D) A more equal distribution of resources in the economy 
A) An improvement of calculator technology 
B) An increase in resources for producing other goods 
C) A reduction in the need for calculators in the economy 
D) A more equal distribution of resources in the economy

Question 4

The price system automatically leads to an efficient allocation of inputs among the different production processes.

Accepted Answer

A) True 
 B)False

Question 5

The production possibilities frontier illustrates

Accepted Answer

A) the fundamental fact of scarcity. 
B) the opportunity cost of acquiring more of one good. 
C) maximum output utilizing all resources efficiently. 
D) All of the responses are correct. 
A) the fundamental fact of scarcity. 
B) the opportunity cost of acquiring more of one good. 
C) maximum output utilizing all resources efficiently. 
D) All of the responses are correct.

Question 6

Most economists support the idea of peak-load pricing on the grounds of

Accepted Answer

A) fairness in income distribution. 
B) efficiency in input usage. 
C) equality of opportunity. 
D) efficiency in output allocation. 
A) fairness in income distribution. 
B) efficiency in input usage. 
C) equality of opportunity. 
D) efficiency in output allocation.

Question 7

An efficient allocation of resources is demonstrated by a point

Accepted Answer

A) above the production possibilities frontier. 
B) below the production possibilities frontier. 
C) on the production possibilities frontier. 
D) near the middle of the production possibilities frontier. 
A) above the production possibilities frontier. 
B) below the production possibilities frontier. 
C) on the production possibilities frontier. 
D) near the middle of the production possibilities frontier.

Question 8

The task of deciding which consumer gets each of the goods produced in a free-market economy is solved by

Accepted Answer

A) the price system. 
B) the industries that produce the goods. 
C) the central planners. 
D) citizens with political power. 
A) the price system. 
B) the industries that produce the goods. 
C) the central planners. 
D) citizens with political power.

Question 9

Points below the production possibilities frontier are inefficient because it is possible to make someone better off without making anyone else worse off.

Accepted Answer

A) True 
 B)False

Question 10

If the marginal cost of producing steel exceeds the marginal utility of using steel, then for economic efficiency,

Accepted Answer

A) the price of steel should fall. 
B) society should produce less steel. 
C) the price of goods made with steel should fall. 
D) society should direct resources toward steel production and away from the production of other goods. 
A) the price of steel should fall. 
B) society should produce less steel. 
C) the price of goods made with steel should fall. 
D) society should direct resources toward steel production and away from the production of other goods.

Question 11

To be efficient, outputs should be produced that minimize total cost.

Accepted Answer

A) True 
 B)False

Question 12

Milk costs $2 and the last unit provides $4 in marginal utility. Cheese costs $4 and the last unit provides $2 in marginal utility. Is this an efficient allocation of resources? If so, why? If not, why not?

Accepted Answer

Allocation is inefficient. Milk is provi

Question 13

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

Accepted Answer

The price mechanism solves the distribut

Question 14

Economics can decide

Accepted Answer

A) the appropriate trade-off between fairness and efficiency. 
B) which pricing arrangements are fair and which are unfair. 
C) whether a pricing decision will impose heavy inefficiency costs on society. 
D) All of the responses are correct. 
A) the appropriate trade-off between fairness and efficiency. 
B) which pricing arrangements are fair and which are unfair. 
C) whether a pricing decision will impose heavy inefficiency costs on society. 
D) All of the responses are correct.

Question 15

Mutually beneficial trade is possible because of differing marginal utilities.

Accepted Answer

A) True 
 B)False

Question 16

If the poor cannot afford proper medical treatment, an economist, for reasons of efficiency, would favor

Accepted Answer

A) giving the poor added income to spend as he or she sees fit. 
B) paying doctors bonuses to treat the poor. 
C) paying the medical bills of the poor. 
D) giving the poor "medical stamps." 
A) giving the poor added income to spend as he or she sees fit. 
B) paying doctors bonuses to treat the poor. 
C) paying the medical bills of the poor. 
D) giving the poor "medical stamps."

Question 17

The technique called input-output analysis relies heavily on

Accepted Answer

A) a mathematical framework that includes details for each product. 
B) a model that incorporates the interdependence of the economies industries. 
C) large amounts of production data. 
D) All of these responses are correct. 
A) a mathematical framework that includes details for each product. 
B) a model that incorporates the interdependence of the economies industries. 
C) large amounts of production data. 
D) All of these responses are correct.

Question 18

Which of the following is concerned with the distribution part of resource allocation?

Accepted Answer

A) An economy decides to produce equal quantities wheat, rice, and clothes. 
B) An economy decides to use 25 percent of the available capital for producing clothes. 
C) An economy decides to ration 40 percent of its output to low income groups. 
D) An economy decides to use more labor for producing wheat and rice. 
A) An economy decides to produce equal quantities wheat, rice, and clothes. 
B) An economy decides to use 25 percent of the available capital for producing clothes. 
C) An economy decides to ration 40 percent of its output to low income groups. 
D) An economy decides to use more labor for producing wheat and rice.

Question 19

Higher prices for scarcer resources can improve the efficiency of an economy.

Accepted Answer

A) True 
 B)False

Question 20

In a laissez-faire system, the price mechanism dictates the production planning decisions.

Accepted Answer

A) True 
 B)False

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

The MU of computers is initially larger than the MC of producing them in a free market. We may expect output of computers to

In a competitive market economy, a resource in short supply will be allocated

Figure 11-1 ​ In Figure 11-1, what can be concluded about the economy if production moves from Point D to Point A?

The price system automatically leads to an efficient allocation of inputs among the different production processes.

The production possibilities frontier illustrates

Most economists support the idea of peak-load pricing on the grounds of

An efficient allocation of resources is demonstrated by a point

The task of deciding which consumer gets each of the goods produced in a free-market economy is solved by

Points below the production possibilities frontier are inefficient because it is possible to make someone better off without making anyone else worse off.

If the marginal cost of producing steel exceeds the marginal utility of using steel, then for economic efficiency,

To be efficient, outputs should be produced that minimize total cost.

Milk costs $2 and the last unit provides $4 in marginal utility. Cheese costs $4 and the last unit provides $2 in marginal utility. Is this an efficient allocation of resources? If so, why? If not, why not?

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

Economics can decide

Mutually beneficial trade is possible because of differing marginal utilities.

If the poor cannot afford proper medical treatment, an economist, for reasons of efficiency, would favor

The technique called input-output analysis relies heavily on

Which of the following is concerned with the distribution part of resource allocation?

Higher prices for scarcer resources can improve the efficiency of an economy.

In a laissez-faire system, the price mechanism dictates the production planning decisions.

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 11-1 In Figure 11-1, what can be concluded about the economy if production moves from Point D to Point A?