Question 1

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 above 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 above are correct.

Question 2

The price system rations goods among consumers in such a way that

Accepted Answer

A) all are treated equally. 
B) all needs are satisfied. 
C) the rich are favored. 
D) important needs are satisfied first. 
A) all are treated equally. 
B) all needs are satisfied. 
C) the rich are favored. 
D) important needs are satisfied first.

Question 3

Which of the following statements concerning efficiency is correct?

Accepted Answer

A) If a toll road is heavily used so that traffic movement is slowed, the price per vehicle should be reduced since the road is generating more revenue. 
B) Economists advocate high prices for abundant resources and low prices for scarce resources. 
C) If a toll road is heavily used and traffic movement is difficult, the price per vehicle should be increased to shift some traffic to less-crowded roads. 
D) None of the above is desirable in promoting efficient use of scarce road space. 
A) If a toll road is heavily used so that traffic movement is slowed, the price per vehicle should be reduced since the road is generating more revenue. 
B) Economists advocate high prices for abundant resources and low prices for scarce resources. 
C) If a toll road is heavily used and traffic movement is difficult, the price per vehicle should be increased to shift some traffic to less-crowded roads. 
D) None of the above is desirable in promoting efficient use of scarce road space.

Question 4

What does the production possibility curve 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 which lies below the curve is more efficient. 
D) A point which 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 which lies below the curve is more efficient. 
D) A point which lies above the curve is readily achievable.

Question 5

Figure 14-4
  
-In Figure 14-4, 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 margina

Question 6

Which central coordination task has claimed the most attention of central planners?

Accepted Answer

A) Output selection 
B) Production planning 
C) Distribution 
D) Rationing 
A) Output selection 
B) Production planning 
C) Distribution 
D) Rationing

Question 7

When a shortage occurs in the market for a good, quantity

Accepted Answer

A) demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. 
B) supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. 
C) demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. 
D) supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption. 
A) demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption. 
B) supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption. 
C) demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption. 
D) supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.

Question 8

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 above 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 above are correct.

Question 9

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 provid

Question 10

Free markets produce relatively high levels of efficiency but low rates of growth.

Accepted Answer

A) True 
 B)False

Question 11

The coordination task of any economy that answers the question of how output shall be divided among consumers may best be described as

Accepted Answer

A) output selection. 
B) production planning. 
C) distribution. 
D) None of the above is correct. 
A) output selection. 
B) production planning. 
C) distribution. 
D) None of the above is correct.

Question 12

When box lunches are handed out at an elementary school, Jimmy (who loves chocolate and hates raisins) gets a raisin cookie and Johnny (who hates chocolate and loves raisins) gets a chocolate chip cookie.This is an example of inefficiency in

Accepted Answer

A) output selection. 
B) production planning. 
C) product distribution. 
D) market segmentation. 
A) output selection. 
B) production planning. 
C) product distribution. 
D) market segmentation.

Question 13

Jupiter likes moons more than rings and gets marginal utility worth $5 from the last moon, and $2 from the last ring.Saturn prefers rings, getting MU = $3 from the last ring and $1 from moons.Describe a trade that would increase efficiency.

Accepted Answer

Jupiter could trade a ring to Saturn.Sat

Question 14

Which nation listed below is successfully transitioning from a planned economy to a hybrid market economy?

Accepted Answer

A) People's Republic of China. 
B) Japan. 
C) United Kingdom. 
D) United States. 
A) People's Republic of China. 
B) Japan. 
C) United Kingdom. 
D) United States.

Question 15

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% of the available capital for producing clothes. 
C) An economy decides to ration 40% 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% of the available capital for producing clothes. 
C) An economy decides to ration 40% of its output to low income groups. 
D) An economy decides to use more labor for producing wheat and rice.

Question 16

An efficient distribution of goods requires that

Accepted Answer

A) everyone gets an equal share of each good. 
B) marginal cost equal marginal utility for the last unit produced. 
C) each person derives the same total utility from the good. 
D) since tastes differ, every person pays a different price in accordance with different marginal utilities. 
A) everyone gets an equal share of each good. 
B) marginal cost equal marginal utility for the last unit produced. 
C) each person derives the same total utility from the good. 
D) since tastes differ, every person pays a different price in accordance with different marginal utilities.

Question 17

If a technological breakthrough reduces input quantities needed to produce some item,

Accepted Answer

A) cost of production will be increased. 
B) the price of the product will rise. 
C) the price of the product will fall. 
D) quantity demanded of the product will fall. 
A) cost of production will be increased. 
B) the price of the product will rise. 
C) the price of the product will fall. 
D) quantity demanded of the product will fall.

Question 18

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 19

When the price of a good is below its equilibrium level under perfect competition,

Accepted Answer

A) consumers would benefit from an expansion of output. 
B) some consumers are earning larger consumer's surpluses than they would in equilibrium. 
C) the market is not operating at maximum efficiency. 
D) All of the above are correct. 
A) consumers would benefit from an expansion of output. 
B) some consumers are earning larger consumer's surpluses than they would in equilibrium. 
C) the market is not operating at maximum efficiency. 
D) All of the above are correct.

Question 20

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.

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

The production possibilities frontier illustrates

The price system rations goods among consumers in such a way that

Which of the following statements concerning efficiency is correct?

What does the production possibility curve imply about the resource allocation?

Figure 14-4 -In Figure 14-4, 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.

Which central coordination task has claimed the most attention of central planners?

When a shortage occurs in the market for a good, quantity

Which of the following statements is correct?

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?

Free markets produce relatively high levels of efficiency but low rates of growth.

The coordination task of any economy that answers the question of how output shall be divided among consumers may best be described as

When box lunches are handed out at an elementary school, Jimmy (who loves chocolate and hates raisins) gets a raisin cookie and Johnny (who hates chocolate and loves raisins) gets a chocolate chip cookie.This is an example of inefficiency in

Jupiter likes moons more than rings and gets marginal utility worth $5 from the last moon, and $2 from the last ring.Saturn prefers rings, getting MU = $3 from the last ring and $1 from moons.Describe a trade that would increase efficiency.

Which nation listed below is successfully transitioning from a planned economy to a hybrid market economy?

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

An efficient distribution of goods requires that

If a technological breakthrough reduces input quantities needed to produce some item,

The issue of fairness versus efficiency arises

When the price of a good is below its equilibrium level under perfect competition,

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

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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