Question 1

One reason to require licensing of attorneys is that

Accepted Answer

A)  legal services generate positive externalities. 
B)  legal services are used primarily by the wealthy. 
C)  legal services are a private good. 
D)  consumers of legal services lack perfect information. 
A)  legal services generate positive externalities. 
B)  legal services are used primarily by the wealthy. 
C)  legal services are a private good. 
D)  consumers of legal services lack perfect information. D

Question 2

Equity should never be used to judge economic policy.

Accepted Answer

A) True 
 B)False  False

Question 3

Education's benefit to society is an example of an externality.

Accepted Answer

A) True 
 B)False  True

Question 4

If PX > MCX, society gains by producing more X.

Accepted Answer

A) True 
 B)False

Question 5

Market failure results in an inefficient allocation of resources.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following help to correct for the market failure of imperfect information?

Accepted Answer

A)  professional licensing 
B)  homeowner warranties 
C)  nutrition labeling 
D)  All of the above are correct. 
A)  professional licensing 
B)  homeowner warranties 
C)  nutrition labeling 
D)  All of the above are correct.

Question 7

Which of the following is an example of an external benefit?

Accepted Answer

A)  More people start to install solar panels on their roofs, and as a result, electricity use goes down as does the pollution created by the generation of electricity. 
B)  Firms are able to reduce their costs of production by using a more efficient technology. 
C)  The city spends $500,000 to upgrade the local jail. 
D)  A company opens a slaughterhouse at the end of your street. 
A)  More people start to install solar panels on their roofs, and as a result, electricity use goes down as does the pollution created by the generation of electricity. 
B)  Firms are able to reduce their costs of production by using a more efficient technology. 
C)  The city spends $500,000 to upgrade the local jail. 
D)  A company opens a slaughterhouse at the end of your street.

Question 8

If society will gain by producing less X, then it must be the case that currently

Accepted Answer

A)  PX = MCX. 
B)  PX > MCX. 
C)  PX X. 
D)  either PX > MCX or PX X. 
A)  PX = MCX. 
B)  PX > MCX. 
C)  PX X. 
D)  either PX > MCX or PX X.

Question 9

Refer to the information provided in Figure 12.1 below to answer the question(s) that follow.   Figure 12.1
-Refer to Figure 12.1. The firm is

Accepted Answer

A)  equally efficient when it produces at points A and B. 
B)  more efficient when it produces at point A than at point B. 
C)  more efficient when it produces at point B than at point A. 
D)  producing at least possible cost anywhere along the given ATC curve. 
A)  equally efficient when it produces at points A and B. 
B)  more efficient when it produces at point A than at point B. 
C)  more efficient when it produces at point B than at point A. 
D)  producing at least possible cost anywhere along the given ATC curve.

Question 10

Public goods are goods that we all agree are useful and therefore are all willing to pay for. This implies that there is no efficiency problem in the production of public goods.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following help to correct for the market failure of imperfect information?

Accepted Answer

A)  truth-in-advertising regulations 
B)  used car warranties 
C)  medical licensing 
D)  All of the above are correct. 
A)  truth-in-advertising regulations 
B)  used car warranties 
C)  medical licensing 
D)  All of the above are correct.

Question 12

A ________ system is one in which all possible trades that make some societal members better off without making others worse off have been exhausted.

Accepted Answer

A)  Pareto maximized 
B)  Pareto optimal 
C)  market 
D)  general equilibrium 
A)  Pareto maximized 
B)  Pareto optimal 
C)  market 
D)  general equilibrium

Question 13

Under perfect competition, firms produce the ________ level of output because price equals marginal cost.

Accepted Answer

A)  greatest 
B)  most costly 
C)  equitable 
D)  efficient 
A)  greatest 
B)  most costly 
C)  equitable 
D)  efficient

Question 14

Air pollution is an example of a negative externality.

Accepted Answer

A) True 
 B)False

Question 15

Both economists and mathematicians have shown there exists at least one set of prices that will clear all markets in a system simultaneously, known as equilibrium price.

Accepted Answer

A) True 
 B)False

Question 16

In perfect competition, when firms are maximizing profits and households are maximizing utility,

Accepted Answer

A)  Pareto optimality has been obtained. 
B)  voluntary exchange can be used to make both firms and households better off. 
C)  the outcome is inefficient. 
D)  individual welfare is maximized, but social welfare is not. 
A)  Pareto optimality has been obtained. 
B)  voluntary exchange can be used to make both firms and households better off. 
C)  the outcome is inefficient. 
D)  individual welfare is maximized, but social welfare is not.

Question 17

Freely functioning markets

Accepted Answer

A)  always produce an efficient allocation of resources. 
B)  may be unfair due to significant income disparities that result. 
C)  have no need for government intervention. 
D)  All of the above are correct. 
A)  always produce an efficient allocation of resources. 
B)  may be unfair due to significant income disparities that result. 
C)  have no need for government intervention. 
D)  All of the above are correct.

Question 18

The life insurance industry is an example of an industry with imperfect information.

Accepted Answer

A) True 
 B)False

Question 19

Efficiency is the condition in which the economy is producing what people want at the least possible cost.

Accepted Answer

A) True 
 B)False

Question 20

Jennifer trades her autographed picture of Hulk Hogan for Alyssa's autographed picture of Pee-wee Herman, and both are happy with the exchange. This is an example of

Accepted Answer

A)  Pareto optimality. 
B)  partial equilibrium. 
C)  general equilibrium. 
D)  voluntary exchange. 
A)  Pareto optimality. 
B)  partial equilibrium. 
C)  general equilibrium. 
D)  voluntary exchange.

Exam 12: General Equilibrium and the Efficiency of Perfect Competition

One reason to require licensing of attorneys is that

Equity should never be used to judge economic policy.

Education's benefit to society is an example of an externality.

If PX > MCX, society gains by producing more X.

Market failure results in an inefficient allocation of resources.

Which of the following help to correct for the market failure of imperfect information?

Which of the following is an example of an external benefit?

If society will gain by producing less X, then it must be the case that currently

Refer to the information provided in Figure 12.1 below to answer the question(s) that follow. Figure 12.1 -Refer to Figure 12.1. The firm is

Public goods are goods that we all agree are useful and therefore are all willing to pay for. This implies that there is no efficiency problem in the production of public goods.

Which of the following help to correct for the market failure of imperfect information?

A ________ system is one in which all possible trades that make some societal members better off without making others worse off have been exhausted.

Under perfect competition, firms produce the ________ level of output because price equals marginal cost.

Air pollution is an example of a negative externality.

Both economists and mathematicians have shown there exists at least one set of prices that will clear all markets in a system simultaneously, known as equilibrium price.

In perfect competition, when firms are maximizing profits and households are maximizing utility,

Freely functioning markets

The life insurance industry is an example of an industry with imperfect information.

Efficiency is the condition in which the economy is producing what people want at the least possible cost.

Jennifer trades her autographed picture of Hulk Hogan for Alyssa's autographed picture of Pee-wee Herman, and both are happy with the exchange. This is an example of

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

If P_X > MC_X, society gains by producing more X.