Question 1

Points below the production possibilities frontier are inefficient because it is possible to make someone better off without making anyone else worse off.

Accepted Answer

A) True 
 B)False

Question 2

The rule for efficient output selection is stated as MC = MU.Explain how the rule results in economic efficiency.

Accepted Answer

Efficiency in output selection requires ...

Question 3

Any increase in efficiency increases only profits of producers,with no increase in output.

Accepted Answer

A) True 
 B)False  False

Question 4

With a monopoly,the consumer's surplus is lower than it would be with a perfectly competitive industry.

Accepted Answer

A) True 
 B)False

Question 5

Economists believe having higher prices for scarcer resources promotes efficiency.

Accepted Answer

A) True 
 B)False

Question 6

Prices serve the public interest by

Accepted Answer

A)  making resource owners wealthy.
B)  rationing scarce resources.
C)  keeping poor people from purchasing more than they can afford.
D)  forcing the government to participate in the market.E) All of the above
F) B) and D)

Question 7

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.E) A) and D)
F) B) and D)

Question 8

In order for the price system to have satisfied the exacting requirements for efficiency,

Accepted Answer

A)  MU must equal MC for each and every commodity.
B)  the average cost of producing each good must be equal to its MU.
C)  the maximum possible of total economic profit must be produced.
D)  every consumer's MU will be equal to marginal physical productE) B) and C)
F) None of the above

Question 9

Under a system of laissez faire,output selection is determined by consumers' wants.

Accepted Answer

A) True 
 B)False

Question 10

What makes production-planning a daunting task for central planners?

Accepted Answer

Because the output required from any one...

Question 11

For an efficient outcome,MR must exceed MC.

Accepted Answer

A) True 
 B)False

Question 12

Scarcity is illustrated graphically by a production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 13

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.E) A) and B)
F) None of the above

Question 14

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.E) C) and D)
F) None of the above C

Question 15

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.E) A) and B)
F) All of the above

Question 16

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.E) A) and B)
F) A) and C)

Question 17

Input-output analysis is a technique used to solve complicated market equations.

Accepted Answer

A) True 
 B)False

Question 18

Scarcity limits the volume of goods that an economic system can produce,but does not limit the production of services.

Accepted Answer

A) True 
 B)False

Question 19

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.E) B) and D)
F) A) and B) A

Question 20

Figure 14-3
 
-In Figure 14-3,if person 1 and person 2 have the indicated quantities of cheese and crackers,and are on the indicated indifference curves,is there the possibility of mutually beneficial trade? Explain.

Accepted Answer

Yes.For person 1,the marginal utility of...

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

Points below the production possibilities frontier are inefficient because it is possible to make someone better off without making anyone else worse off.

Correct AnswerverifiedShow Answer

The rule for efficient output selection is stated as MC = MU.Explain how the rule results in economic efficiency.

Correct AnswerverifiedEfficiency in output selection requires ...View AnswerShow Answer

Any increase in efficiency increases only profits of producers,with no increase in output.

Correct AnswerverifiedFalse

With a monopoly,the consumer's surplus is lower than it would be with a perfectly competitive industry.

Correct AnswerverifiedShow Answer

Economists believe having higher prices for scarcer resources promotes efficiency.

Correct AnswerverifiedShow Answer

Prices serve the public interest by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In order for the price system to have satisfied the exacting requirements for efficiency,

Correct AnswerverifiedShow Answer

Under a system of laissez faire,output selection is determined by consumers' wants.

Correct AnswerverifiedShow Answer

What makes production-planning a daunting task for central planners?

Correct AnswerverifiedBecause the output required from any one...View AnswerShow Answer

For an efficient outcome,MR must exceed MC.

Correct AnswerverifiedShow Answer

Scarcity is illustrated graphically by a production possibilities frontier.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Under a laissez-faire system,

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

An efficient allocation of resources exists if

Correct AnswerverifiedShow Answer

Input-output analysis is a technique used to solve complicated market equations.

Correct AnswerverifiedShow Answer

Scarcity limits the volume of goods that an economic system can produce,but does not limit the production of services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

Figure 14-3 -In Figure 14-3,if person 1 and person 2 have the indicated quantities of cheese and crackers,and are on the indicated indifference curves,is there the possibility of mutually beneficial trade? Explain.

Correct AnswerverifiedYes.For person 1,the marginal utility of...View AnswerShow Answer

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Efficiency in output selection requires ...
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False

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Because the output required from any one...
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C

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A

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Yes.For person 1,the marginal utility of...
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