Question 1

The technique that addresses the problem of assigning inputs to specific industries is

Accepted Answer

A) known as laissez faire. 
B) input-output analysis. 
C) cost-benefit analysis. 
D) a production possibilities frontier. 
A) known as laissez faire. 
B) input-output analysis. 
C) cost-benefit analysis. 
D) a production possibilities frontier.

Question 2

If the allocation of resources is efficient, then a market economy will maximize the difference between total utility and total cost.

Accepted Answer

A) True 
 B)False

Question 3

An economy is judged efficient if

Accepted Answer

A) it is good at producing what people want. 
B) it produces things that people may not want but in the least wasteful way. 
C) produces whatever people want in a way that may not be the least wasteful. 
D) it is a free-market economy and not a command market. 
A) it is good at producing what people want. 
B) it produces things that people may not want but in the least wasteful way. 
C) produces whatever people want in a way that may not be the least wasteful. 
D) it is a free-market economy and not a command market.

Question 4

Perfect central planning is nearly impossible for all of these reasons except

Accepted Answer

A) production processes between industries are often interdependent. 
B) some processes must be decided together, and not individually, because of their interdependence. 
C) if the output target for one industry is adjusted, many others must also be adjusted. 
D) All of these reasons are correct. 
A) production processes between industries are often interdependent. 
B) some processes must be decided together, and not individually, because of their interdependence. 
C) if the output target for one industry is adjusted, many others must also be adjusted. 
D) All of these reasons are correct.

Question 5

Prices can work to benefit the public interest by

Accepted Answer

A) raising corporate profit levels. 
B) improving the fairness of the distribution of income. 
C) allowing government to regulate the economy. 
D) allocating scarce resources to those who value the resource the most. 
A) raising corporate profit levels. 
B) improving the fairness of the distribution of income. 
C) allowing government to regulate the economy. 
D) allocating scarce resources to those who value the resource the most.

Question 6

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.

Accepted Answer

Firms are induced to buy and use inputs

Question 7

In a market system, the working of the price system only results in the distribution of income.

Accepted Answer

A) True 
 B)False

Question 8

Central planning systems were used in the former Soviet Union but since this union dissolved no other nations now use this allocation process.

Accepted Answer

A) True 
 B)False

Question 9

The term "laissez-faire" was given to a system of free markets by

Accepted Answer

A) twentieth-century American economists. 
B) a seventeenth-century Scottish economist. 
C) eighteenth-century French economists. 
D) nineteenth-century Italian economists. 
A) twentieth-century American economists. 
B) a seventeenth-century Scottish economist. 
C) eighteenth-century French economists. 
D) nineteenth-century Italian economists.

Question 10

If the marginal utility of a product exceeds its MC, we would want, on efficiency grounds, to

Accepted Answer

A) increase production. 
B) decrease production. 
C) leave production constant. 
D) One cannot tell without knowing the price. 
A) increase production. 
B) decrease production. 
C) leave production constant. 
D) One cannot tell without knowing the price.

Question 11

Figure 11-2 ​
 
In Figure 11-2, which of the points are efficient allocations of resources?

Accepted Answer

A) A, B, and C 
B) B and C only 
C) C and B and D 
D) B only 
A) A, B, and C 
B) B and C only 
C) C and B and D 
D) B only

Question 12

The issue of fairness versus efficiency arises

Accepted Answer

A) only in a command economy. 
B) only in a market economy. 
C) in neither a command nor a market economy. 
D) in both a command and a market economy. 
A) only in a command economy. 
B) only in a market economy. 
C) in neither a command nor a market economy. 
D) in both a command and a market economy.

Question 13

Economists believe having higher prices for scarcer resources promotes efficiency.

Accepted Answer

A) True 
 B)False

Question 14

The production possibilities frontier illustrates

Accepted Answer

A) the constant rate of technological progress. 
B) the fundamental concept of scarcity. 
C) the rapid growth of the U.S. economy. 
D) that guns always trade for butter. 
A) the constant rate of technological progress. 
B) the fundamental concept of scarcity. 
C) the rapid growth of the U.S. economy. 
D) that guns always trade for butter.

Question 15

Which of the following statements is correct?

Accepted Answer

A) Low prices may not always be in the public interest. 
B) If prices on scarce resources are set "too low," consumers will receive the "wrong" signals and be encouraged to consume more, thus squandering resources. 
C) Raising prices on scarce resources is generally politically unpopular. 
D) All of the responses are correct. 
A) Low prices may not always be in the public interest. 
B) If prices on scarce resources are set "too low," consumers will receive the "wrong" signals and be encouraged to consume more, thus squandering resources. 
C) Raising prices on scarce resources is generally politically unpopular. 
D) All of the responses are correct.

Question 16

Figure 11-2 ​
 
Using the information in Figure 11-2, which point or points represents an inefficient allocation of resources?

Accepted Answer

A) A 
B) B 
C) A and D 
D) D 
A) A 
B) B 
C) A and D 
D) D

Question 17

In a market system, the mechanism that coordinates economic activity is

Accepted Answer

A) the profit motive. 
B) the price system. 
C) input-output analysis. 
D) program trading in the stock market. 
A) the profit motive. 
B) the price system. 
C) input-output analysis. 
D) program trading in the stock market.

Question 18

Division of iron ore between the production of bridge girders and tanker drums is an example of

Accepted Answer

A) a distribution problem. 
B) production planning. 
C) input-output analysis. 
D) both output selection and distribution. 
A) a distribution problem. 
B) production planning. 
C) input-output analysis. 
D) both output selection and distribution.

Question 19

The city of London imposes congestion fees on cars and trucks that drive in central London. The charge is higher Monday through Friday than on weekends. This example of

Accepted Answer

A) peak pricing. 
B) positive externalities. 
C) profit maximizing. 
D) British socialism. 
A) peak pricing. 
B) positive externalities. 
C) profit maximizing. 
D) British socialism.

Question 20

Scarcity is illustrated graphically by a production possibilities frontier.

Accepted Answer

A) True 
 B)False

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

The technique that addresses the problem of assigning inputs to specific industries is

If the allocation of resources is efficient, then a market economy will maximize the difference between total utility and total cost.

An economy is judged efficient if

Perfect central planning is nearly impossible for all of these reasons except

Prices can work to benefit the public interest by

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.

In a market system, the working of the price system only results in the distribution of income.

Central planning systems were used in the former Soviet Union but since this union dissolved no other nations now use this allocation process.

The term "laissez-faire" was given to a system of free markets by

If the marginal utility of a product exceeds its MC, we would want, on efficiency grounds, to

Figure 11-2 ​ In Figure 11-2, which of the points are efficient allocations of resources?

The issue of fairness versus efficiency arises

Economists believe having higher prices for scarcer resources promotes efficiency.

The production possibilities frontier illustrates

Which of the following statements is correct?

Figure 11-2 ​ Using the information in Figure 11-2, which point or points represents an inefficient allocation of resources?

In a market system, the mechanism that coordinates economic activity is

Division of iron ore between the production of bridge girders and tanker drums is an example of

The city of London imposes congestion fees on cars and trucks that drive in central London. The charge is higher Monday through Friday than on weekends. This example of

Scarcity is illustrated graphically by a production possibilities frontier.

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 of the points are efficient allocations of resources?

Figure 11-2 Using the information in Figure 11-2, which point or points represents an inefficient allocation of resources?