Question 1

The government's role in a laissez-faire system includes

Accepted Answer

A) determining market prices 
B) constructing and maintaining roads and infrastructure 
C) determine the levels of profits earned by firms 
D) impose minimum wages 
A) determining market prices 
B) constructing and maintaining roads and infrastructure 
C) determine the levels of profits earned by firms 
D) impose minimum wages

Question 2

To equalize traffic on transportation routes, a pricing arrangement called "peak, off-peak pricing" would most likely be proposed by

Accepted Answer

A) economists. 
B) politicians. 
C) regulators. 
D) the general public. 
A) economists. 
B) politicians. 
C) regulators. 
D) the general public.

Question 3

Marxists and leaders of communist economies actually often admire the market mechanism for its

Accepted Answer

A) efficiency in allocation of resources. 
B) fairness in distribution of output. 
C) maximization of net benefits for consumers. 
D) effectiveness in achieving high rates of growth. 
A) efficiency in allocation of resources. 
B) fairness in distribution of output. 
C) maximization of net benefits for consumers. 
D) effectiveness in achieving high rates of growth.

Question 4

Total surplus is the sum of producer's surplus and consumer's surplus.

Accepted Answer

A) True 
 B)False

Question 5

Figure 11-4 
​ 
   
In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.

Accepted Answer

Yes. For the cheese industry, the margin

Question 6

When an economy is operating with maximum efficiency, the production of more of commodity A will entail the production of less of commodity B because

Accepted Answer

A) resources are specialized and cannot be easily reallocated. 
B) resources are limited. 
C) the structure of demand is fixed at any point in time. 
D) material wants are insatiable. 
A) resources are specialized and cannot be easily reallocated. 
B) resources are limited. 
C) the structure of demand is fixed at any point in time. 
D) material wants are insatiable.

Question 7

An economy consists of two goods: beef and lamb. Of all the points on this economy's production possibilities frontier, which one is best in terms of efficiency?

Accepted Answer

There is no best poi

Question 8

Keeping landing fees low at airports during the "peak" hours

Accepted Answer

A) perpetuates congestion during those hours. 
B) is politically unpopular. 
C) contributes to efficient allocation of airport facilities. 
D) would lessen the problem of delayed flight landings. 
A) perpetuates congestion during those hours. 
B) is politically unpopular. 
C) contributes to efficient allocation of airport facilities. 
D) would lessen the problem of delayed flight landings.

Question 9

Questions of what to produce, how much to produce, and who will get the output must be faced by

Accepted Answer

A) market economies. 
B) centrally planned economies. 
C) the economies of underdeveloped countries. 
D) all economies. 
A) market economies. 
B) centrally planned economies. 
C) the economies of underdeveloped countries. 
D) all economies.

Question 10

What does the production possibilities frontier imply about the resource allocation?

Accepted Answer

A) Only some points on the curve are efficient. 
B) All points on the curve are equally efficient. 
C) A point that lies below the curve is more efficient. 
D) A point that lies above the curve is readily achievable. 
A) Only some points on the curve are efficient. 
B) All points on the curve are equally efficient. 
C) A point that lies below the curve is more efficient. 
D) A point that lies above the curve is readily achievable.

Question 11

Under laissez-faire, the allocation of scarce resources among the different industries

Accepted Answer

A) is possible only with government tax and subsidy policies. 
B) is accomplished by the price system. 
C) requires a considerable amount of central planning. 
D) is the result of consumer planning. 
A) is possible only with government tax and subsidy policies. 
B) is accomplished by the price system. 
C) requires a considerable amount of central planning. 
D) is the result of consumer planning.

Question 12

In a planned economy, the concept of efficiency is

Accepted Answer

A) more important than in a market economy. 
B) less important than in a market economy. 
C) not important at all. 
D) as important as in a market economy. 
A) more important than in a market economy. 
B) less important than in a market economy. 
C) not important at all. 
D) as important as in a market economy.

Question 13

Which of the following holds true in a market when the invisible hand functions properly?

Accepted Answer

A) MC = MU = P 
B) P = MRS 
C) P = MC but not P = MU 
D) P = MU but not P = MC 
A) MC = MU = P 
B) P = MRS 
C) P = MC but not P = MU 
D) P = MU but not P = MC

Question 14

Is an efficient market allocation fair? Explain.

Accepted Answer

It is not generally possible to define f

Question 15

Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as "fairer."

Accepted Answer

A) True 
 B)False

Question 16

The basic forces driving the "invisible hand" are

Accepted Answer

A) government and business. 
B) information and computer technology. 
C) competition and self-interest. 
D) cooperation and altruism. 
A) government and business. 
B) information and computer technology. 
C) competition and self-interest. 
D) cooperation and altruism.

Question 17

The "invisible hand" refers to the control that government must exercise over a market economy.

Accepted Answer

A) True 
 B)False

Question 18

Lower prices are always better for society.

Accepted Answer

A) True 
 B)False

Question 19

There are only two people in the world (Adam and Eve)and only one good (apples). Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20. Which of the following statements must be true?

Accepted Answer

A) Eve's marginal utility from consuming her fourth apple must be greater than Adam's marginal utility from consuming his fourth apple. 
B) The total utility of society will rise if Adam gives Eve one apple. 
C) If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption. 
D) Adam's average utility from consuming apples is greater than Eve's average utility from consuming apples. 
A) Eve's marginal utility from consuming her fourth apple must be greater than Adam's marginal utility from consuming his fourth apple. 
B) The total utility of society will rise if Adam gives Eve one apple. 
C) If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption. 
D) Adam's average utility from consuming apples is greater than Eve's average utility from consuming apples.

Question 20

Under laissez-faire, society's decisions about how much of every product to produce depend on

Accepted Answer

A) consumer preferences only. 
B) production costs only. 
C) consumer preferences and production costs. 
D) neither consumer preferences nor production costs. 
A) consumer preferences only. 
B) production costs only. 
C) consumer preferences and production costs. 
D) neither consumer preferences nor production costs.

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

The government's role in a laissez-faire system includes

To equalize traffic on transportation routes, a pricing arrangement called "peak, off-peak pricing" would most likely be proposed by

Marxists and leaders of communist economies actually often admire the market mechanism for its

Total surplus is the sum of producer's surplus and consumer's surplus.

Figure 11-4 ​ In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.

When an economy is operating with maximum efficiency, the production of more of commodity A will entail the production of less of commodity B because

An economy consists of two goods: beef and lamb. Of all the points on this economy's production possibilities frontier, which one is best in terms of efficiency?

Keeping landing fees low at airports during the "peak" hours

Questions of what to produce, how much to produce, and who will get the output must be faced by

What does the production possibilities frontier imply about the resource allocation?

Under laissez-faire, the allocation of scarce resources among the different industries

In a planned economy, the concept of efficiency is

Which of the following holds true in a market when the invisible hand functions properly?

Is an efficient market allocation fair? Explain.

Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as "fairer."

The basic forces driving the "invisible hand" are

The "invisible hand" refers to the control that government must exercise over a market economy.

Lower prices are always better for society.

There are only two people in the world (Adam and Eve)and only one good (apples). Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20. Which of the following statements must be true?

Under laissez-faire, society's decisions about how much of every product to produce depend on

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 11-4 In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.