Question 1

Input-output analysis is commonly used in production decisions.

Accepted Answer

A) True 
 B)False

Question 2

In an efficient market, a scarce good generally has a ____ than a less-scarce good.

Accepted Answer

A)  higher price
B)  higher total utility to consumers
C)  more even distribution across income classes
D)  lower price in off-peak periods

Question 3

Is an efficient market allocation fair? Explain.

Accepted Answer

It is not generally possible to define f...

Question 4

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.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

We observe that the price per ounce of milk in a quart container is higher than the price per ounce in a gallon container.What is the likely reason for this?

Accepted Answer

A)  The higher costs of quart containers
B)  The higher costs of production of milk in smaller quantities.
C)  Higher transportation costs for smaller container sizes.
D)  The marginal utility of milk is higher in smaller containers than it is in larger containers.

Question 7

For economic efficiency, which of the following conditions should be met?

Accepted Answer

A)  Scarcer goods should have lower prices.
B)  More abundant goods should have lower prices.
C)  More abundant goods should have higher prices.
D)  All goods should have equal prices.

Question 8

In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by

Accepted Answer

A)  the government.
B)  businessmen.
C)  the price system.
D)  workers.

Question 9

Economists favor the use of peak-load pricing since it can

Accepted Answer

A)  improve the equity of the distribution of income.
B)  enhance the efficiency in the use of scarce resources.
C)  improve the profit levels of corporations.
D)  result in lower levels of pollution.

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.

Question 11

Laissez-faire refers to a situation in which there is ____ with the workings of the market system.

Accepted Answer

A)  zero consumer involvement
B)  zero government interference
C)  minimal government interference
D)  complete government interference

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

In an idealized laissez-faire world, the distribution of products is

Accepted Answer

A)  the most efficient.
B)  the most fair.
C)  purely random.
D)  unpredictable.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

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.

Question 17

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.

Question 18

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

Accepted Answer

No.The market system, by itself, will te...

Question 19

Prices are useful in coordinating society's economic planning because

Accepted Answer

A)  they convey information about which goods are scarce and which are plentiful.
B)  economies based on price systems are more flexible than centrally planned economies.
C)  economies based on price systems are more likely than centrally planned economies to minimize the cost of producing society's output.
D)  All of the responses are correct.

Question 20

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

Accepted Answer

A) True 
 B)False

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

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

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For economic efficiency, which of the following conditions should be met?

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

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Economists favor the use of peak-load pricing since it can

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Is an efficient market allocation fair? Explain.

Correct AnswerverifiedIt is not generally possible to define f...View AnswerShow Answer

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

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Prices are useful in coordinating society's economic planning because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

Correct AnswerverifiedNo.The market system, by itself, will te...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In an idealized laissez-faire world, the distribution of products is

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

Correct AnswerverifiedShow Answer

We observe that the price per ounce of milk in a quart container is higher than the price per ounce in a gallon container.What is the likely reason for this?

Correct AnswerverifiedShow Answer

Laissez-faire refers to a situation in which there is ____ with the workings of the market system.

Correct AnswerverifiedShow Answer

In an efficient market, a scarce good generally has a ____ than a less-scarce good.

Correct AnswerverifiedShow Answer

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

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In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by

Correct AnswerverifiedShow Answer

Input-output analysis is commonly used in production decisions.

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

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It is not generally possible to define f...
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No.The market system, by itself, will te...
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