Question 1

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. A

Question 2

An economist would say the price is too high for a certain service if

Accepted Answer

A) poor people couldn't afford to buy it. 
B) nobody could afford to buy it. 
C) the price was above marginal cost. 
D) it is an essential service and consumes a significant share of income. 
A) poor people couldn't afford to buy it. 
B) nobody could afford to buy it. 
C) the price was above marginal cost. 
D) it is an essential service and consumes a significant share of income. C

Question 3

Under a laissez-faire system,

Accepted Answer

A) government organizes production and distribution of goods. 
B) a small bureaucracy of central planners tells firms what to produce and how to produce it. 
C) costs of production and consumers' demands determine the output mix. 
D) firms try to produce the goods that they think are good for consumers. 
A) government organizes production and distribution of goods. 
B) a small bureaucracy of central planners tells firms what to produce and how to produce it. 
C) costs of production and consumers' demands determine the output mix. 
D) firms try to produce the goods that they think are good for consumers. C

Question 4

Central planning is an efficient method for making coordination decisions.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Central planners in command economies

Accepted Answer

A) generally set production targets for firms. 
B) always consult consumers on the output of goods they want to consume. 
C) allow prices to organize the economy's production. 
D) depend upon the invisible hand to coordinate economic activities. 
A) generally set production targets for firms. 
B) always consult consumers on the output of goods they want to consume. 
C) allow prices to organize the economy's production. 
D) depend upon the invisible hand to coordinate economic activities.

Question 7

The price of a ride on the Washington, D.C.metro depends on the time of day you ride.This is an example of

Accepted Answer

A) exploitation. 
B) inefficiency. 
C) political interference with a market. 
D) pricing to spread out demand. 
A) exploitation. 
B) inefficiency. 
C) political interference with a market. 
D) pricing to spread out demand.

Question 8

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

Accepted Answer

A) Administered system 
B) Government 
C) Price system 
D) Central planning 
A) Administered system 
B) Government 
C) Price system 
D) Central planning

Question 9

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will ____, with the likely result that marginal utility will ____.

Accepted Answer

A) rise; fall 
B) fall; rise 
C) rise; rise 
D) fall; fall 
A) rise; fall 
B) fall; rise 
C) rise; rise 
D) fall; fall

Question 10

"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 11

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 12

Command economies are able to achieve greater allocative efficiency than market economies.

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

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 15

When prices of products are set below equilibrium,

Accepted Answer

A) society's resources are inefficiently allocated. 
B) firms expand output to increase profits. 
C) firms earn excessively high profits. 
D) consumers benefit from surpluses of cheap goods. 
A) society's resources are inefficiently allocated. 
B) firms expand output to increase profits. 
C) firms earn excessively high profits. 
D) consumers benefit from surpluses of cheap goods.

Question 16

An optimal allocation of resources is one which is:

Accepted Answer

A) unfair. 
B) fair. 
C) efficient. 
D) inefficient. 
A) unfair. 
B) fair. 
C) efficient. 
D) inefficient.

Question 17

The allocation of resources is efficient under an idealized free market system.

Accepted Answer

A) True 
 B)False

Question 18

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 they see 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 they see fit. 
B) paying doctors bonuses to treat the poor. 
C) paying the medical bills of the poor. 
D) giving the poor "medical stamps."

Question 19

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 above 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 above are correct.

Question 20

Economists believe having higher prices for scarcer resources promotes efficiency.

Accepted Answer

A) True 
 B)False

Exam 14: The Case for Free Markets: the Price System

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

An economist would say the price is too high for a certain service if

Under a laissez-faire system,

Central planning is an efficient method for making coordination decisions.

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

Central planners in command economies

The price of a ride on the Washington, D.C.metro depends on the time of day you ride.This is an example of

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will ____, with the likely result that marginal utility will ____.

"Peak" pricing can best be defined as

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

Command economies are able to achieve greater allocative efficiency than market economies.

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

In a planned economy the concept of efficiency is

When prices of products are set below equilibrium,

An optimal allocation of resources is one which is:

The allocation of resources is efficient under an idealized free market system.

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

Input-output analysis is rarely used because

Economists believe having higher prices for scarcer resources promotes efficiency.

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

Securities: Business Finance 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: Regulation and Antitrust

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Filters

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will , with the likely result that marginal utility will .