Question 1

The idea of the invisible hand was introduced by

Accepted Answer

A) Wassily Leontief. 
B) Adam Smith. 
C) Thomas Jefferson. 
D) Mountifort Longfield. 
A) Wassily Leontief. 
B) Adam Smith. 
C) Thomas Jefferson. 
D) Mountifort Longfield.

Question 2

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 3

Centrally planned economies do not use the price system for anything.

Accepted Answer

A) True 
 B)False

Question 4

In an effort to prepare for war, the Defense Department is required by Congress to stockpile helium, once used to provide lift for blimps (phased out in the 1960s).About 100 years of total U.S.usage of helium is in storage.The Pentagon agrees to buy helium from producers at a price above what would otherwise prevail in the marketplace.Is this likely to result in efficiency?
 Explain.

Accepted Answer

No.If the price is held up to provide a

Question 5

An efficient allocation of resources exists if

Accepted Answer

A) one group of people can get more of the things they want without someone else having to give up anything. 
B) no one can get more of the things he wants without someone else having to give up something. 
C) the economy operates at any point under the production possibilities frontier. 
D) the economy is operating at any point above the production possibilities frontier. 
A) one group of people can get more of the things they want without someone else having to give up anything. 
B) no one can get more of the things he wants without someone else having to give up something. 
C) the economy operates at any point under the production possibilities frontier. 
D) the economy is operating at any point above the production possibilities frontier.

Question 6

Free markets produce allocatively efficient outcomes and have no flaws.

Accepted Answer

A) True 
 B)False

Question 7

When the price of the product falls

Accepted Answer

A) consumer's surplus remains the same. 
B) producers' surplus increases. 
C) consumer's surplus falls. 
D) producer's surplus falls. 
A) consumer's surplus remains the same. 
B) producers' surplus increases. 
C) consumer's surplus falls. 
D) producer's surplus falls.

Question 8

In a market system, the primary instruments used to coordinate economic activity are

Accepted Answer

A) plans. 
B) prices. 
C) input-output analyses. 
D) quantities. 
A) plans. 
B) prices. 
C) input-output analyses. 
D) quantities.

Question 9

The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)

Accepted Answer

A) budget line. 
B) indifference curve. 
C) production possibilities frontier. 
D) marginal cost curve. 
A) budget line. 
B) indifference curve. 
C) production possibilities frontier. 
D) marginal cost curve.

Question 10

The perfect competition price system is the most efficient because it equates MC = P = MU.

Accepted Answer

A) True 
 B)False

Question 11

Economists can evaluate the desirability of the distribution of income.

Accepted Answer

A) True 
 B)False

Question 12

Uncoordinated decisions in perfect competition lead to mass confusion and inefficiency.

Accepted Answer

A) True 
 B)False

Question 13

In a market system, prices are used to coordinate economic activity.

Accepted Answer

A) True 
 B)False

Question 14

For any combination or outputs, there is an efficient allocation of income.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The technique called input-output analysis was invented by

Accepted Answer

A) Adam Smith. 
B) Milton Friedman. 
C) Wassily Leontief. 
D) Mountifort Longfield. 
A) Adam Smith. 
B) Milton Friedman. 
C) Wassily Leontief. 
D) Mountifort Longfield.

Question 17

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 18

If parking spaces on a college campus are scarce, with quantity demanded during the "peak" hours, from 8 a.m.to 11 a.m., far greater than the number of spaces, an economist would propose as an efficient solution,

Accepted Answer

A)  lowering the parking fees during those hours to compensate students for the longer search time. 
B)  charging the same parking fees during all hours of the school day. 
C)  raising parking fees during the peak hours to encourage some students to schedule classes during other hours when parking fees are lower. 
D)  hiring more security guards to patrol for illegal parkers. 
A)  lowering the parking fees during those hours to compensate students for the longer search time. 
B)  charging the same parking fees during all hours of the school day. 
C)  raising parking fees during the peak hours to encourage some students to schedule classes during other hours when parking fees are lower. 
D)  hiring more security guards to patrol for illegal parkers.

Question 19

In a free market, economic activity is coordinated by

Accepted Answer

A) central planners. 
B) prices. 
C) costs. 
D) majority rule. 
A) central planners. 
B) prices. 
C) costs. 
D) majority rule.

Question 20

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.

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

The idea of the invisible hand was introduced by

An economy is judged efficient if

Centrally planned economies do not use the price system for anything.

An efficient allocation of resources exists if

Free markets produce allocatively efficient outcomes and have no flaws.

When the price of the product falls

In a market system, the primary instruments used to coordinate economic activity are

The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)

The perfect competition price system is the most efficient because it equates MC = P = MU.

Economists can evaluate the desirability of the distribution of income.

Uncoordinated decisions in perfect competition lead to mass confusion and inefficiency.

In a market system, prices are used to coordinate economic activity.

For any combination or outputs, there is an efficient allocation of income.

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

The technique called input-output analysis was invented by

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

If parking spaces on a college campus are scarce, with quantity demanded during the "peak" hours, from 8 a.m.to 11 a.m., far greater than the number of spaces, an economist would propose as an efficient solution,

In a free market, economic activity is coordinated by

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

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

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