Question 1

-(Exhibit: Markets and Efficiency)The equilibrium price in Panel (a)tells us that the marginal cost of a pound of apples is:

Accepted Answer

A) less than $0.80. 
B) equal to $0.80. 
C) greater than $0.80. 
D) equal to the average cost of producing apples. 
A) less than $0.80. 
B) equal to $0.80. 
C) greater than $0.80. 
D) equal to the average cost of producing apples.

Question 2

According to the marginal decision rule, if the marginal benefit of an additional unit of an activity exceeds the marginal cost, the quantity of the activity should be increased.

Accepted Answer

A) True 
 B)False

Question 3

If the market supply and demand curves for computers include all costs or benefits, then in this case:

Accepted Answer

A) too few of society's resources are being used to produce computers. 
B) too many of society's resources are being used to produce computers. 
C) the efficient amount of society's resources are being used to produce computers. 
D) there is an external benefit to society from computer production. 
A) too few of society's resources are being used to produce computers. 
B) too many of society's resources are being used to produce computers. 
C) the efficient amount of society's resources are being used to produce computers. 
D) there is an external benefit to society from computer production.

Question 4

When an alternative to the current allocation of resources exists that would increase society's welfare:

Accepted Answer

A) there is market failure. 
B) the efficiency condition is met. 
C) decisionmakers have faced the marginal benefits and marginal costs of their decisions. 
D) producers have maximized total cost. 
A) there is market failure. 
B) the efficiency condition is met. 
C) decisionmakers have faced the marginal benefits and marginal costs of their decisions. 
D) producers have maximized total cost.

Question 5

A normal market supply curve reflects:

Accepted Answer

A) private benefits to sellers. 
B) private costs to sellers. 
C) social benefits to buyers. 
D) external benefits to sellers. 
A) private benefits to sellers. 
B) private costs to sellers. 
C) social benefits to buyers. 
D) external benefits to sellers.

Question 6

-(Exhibit: Market Failure 2)If a competitive market has an external cost of the amount AC, and if the government imposes a fee to cover the cost, the market will achieve the equilibrium point:

Accepted Answer

A) H. 
B) I. 
C) J. 
D) K. 
A) H. 
B) I. 
C) J. 
D) K.

Question 7

Which of the following is a public good?

Accepted Answer

A) carrots 
B) education at Harvard 
C) clean air 
D) water 
A) carrots 
B) education at Harvard 
C) clean air 
D) water

Question 8

If the marginal benefit received from a good is equal to the marginal cost of production, then:

Accepted Answer

A) society's well-being can be improved if production increases. 
B) society's well-being can be improved if production decreases. 
C) the market is producing too much of the good. 
D) the market is producing an efficient quantity. 
A) society's well-being can be improved if production increases. 
B) society's well-being can be improved if production decreases. 
C) the market is producing too much of the good. 
D) the market is producing an efficient quantity.

Question 9

Which of the following statements is (are)true?

Accepted Answer

A) A system of property rights forms the basis for all market exchange. 
B) A system of property rights is essential to an efficient allocation of resources. 
C) Property rights must exist if market exchange is to occur. 
D) All of the above are true. 
A) A system of property rights forms the basis for all market exchange. 
B) A system of property rights is essential to an efficient allocation of resources. 
C) Property rights must exist if market exchange is to occur. 
D) All of the above are true.

Question 10

The _______ is the amount by which an additional unit of an activity increases its total benefit.

Accepted Answer

A) average benefit 
B) net benefit 
C) marginal benefit 
D) top benefit 
A) average benefit 
B) net benefit 
C) marginal benefit 
D) top benefit

Question 11

-(Exhibit: Marginal Benefit, Marginal Cost, and Net Benefit)In Panel (c), if activity level is at J, then there will be a deadweight loss of _______ and a net benefit of _______ .

Accepted Answer

A) CHI; ABC 
B) ABC; CHI. 
C) CHI; ABC minus CHI. 
D) ABC minus CHI; CHI. 
A) CHI; ABC 
B) ABC; CHI. 
C) CHI; ABC minus CHI. 
D) ABC minus CHI; CHI.

Question 12

Market efficiency requires exclusive, but not transferable, property rights.

Accepted Answer

A) True 
 B)False

Question 13

The Demand for Golf Balls
 $$\begin{array} { c c } 
\begin{array} { c } 
\text { Demand Price } \
\text { (per dozen) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { (dozen) }
\end{array} \
\hline 20 & 0 \
18 & 1 \
16 & 2 \
14 & 3 \
12 & 4 \
10 & 5
\end{array}$$
-(Exhibit: The Demand for Golf Balls)Assume that 5 dozen golf balls are purchased for $10 per dozen.Consumer surplus is:

Accepted Answer

A) $1. 
B) $4. 
C) $9. 
D) $25. 
A) $1. 
B) $4. 
C) $9. 
D) $25.

Question 14

Public goods are goods for which the cost of exclusion is prohibitive.

Accepted Answer

A) True 
 B)False

Question 15

According to the marginal decision rule, if marginal benefit:

Accepted Answer

A) exceeds marginal cost, an activity should be reduced. 
B) is less than marginal cost, an activity should be increased. 
C) is equal to marginal cost, net benefit is maximized. 
D) exceeds marginal cost, net benefit is maximized. 
A) exceeds marginal cost, an activity should be reduced. 
B) is less than marginal cost, an activity should be increased. 
C) is equal to marginal cost, net benefit is maximized. 
D) exceeds marginal cost, net benefit is maximized.

Question 16

The net gain of an activity will be minimized at the point at which the MB equals the MC of the activity.

Accepted Answer

A) True 
 B)False

Question 17

Based on the type of analysis described in the Case in Point on Preventing Oil Spills, an economist might reasonably argue that too few people die in airplane crashes if:

Accepted Answer

A) the marginal cost of preventing airplane crashes was less than the marginal benefit of preventing them. 
B) the marginal benefit of preventing airplane crashes was less than the marginal cost of preventing them. 
C) he or she were nuts; no reasonable economist would make such a statement because even though zero airplane crashes are an unlikely outcome, the efforts to prevent them to the greatest extent possible are justified because human lives are at stake. 
D) both A and B are true. 
A) the marginal cost of preventing airplane crashes was less than the marginal benefit of preventing them. 
B) the marginal benefit of preventing airplane crashes was less than the marginal cost of preventing them. 
C) he or she were nuts; no reasonable economist would make such a statement because even though zero airplane crashes are an unlikely outcome, the efforts to prevent them to the greatest extent possible are justified because human lives are at stake. 
D) both A and B are true.

Question 18

Maximizing choices must be made within the parameters imposed by some constraint.

Accepted Answer

A) True 
 B)False

Question 19

According to the marginal decision rule, if marginal benefit:

Accepted Answer

A) exceeds marginal cost, an activity should be increased. 
B) is less than marginal cost, an activity should be increased. 
C) is equal to marginal cost, an activity should be increased. 
D) exceeds marginal cost, net benefit is maximized. 
A) exceeds marginal cost, an activity should be increased. 
B) is less than marginal cost, an activity should be increased. 
C) is equal to marginal cost, an activity should be increased. 
D) exceeds marginal cost, net benefit is maximized.

Question 20

If the price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $10 to spend and decide to purchase 8 bags of peanuts, the maximum quantity of popcorn that you can purchase is _______ boxes.

Accepted Answer

A) 4 
B) 8 
C) 10 
D) 16 
A) 4 
B) 8 
C) 10 
D) 16

Exam 6: Measuring Total Output and Income

-(Exhibit: Markets and Efficiency)The equilibrium price in Panel (a)tells us that the marginal cost of a pound of apples is:

According to the marginal decision rule, if the marginal benefit of an additional unit of an activity exceeds the marginal cost, the quantity of the activity should be increased.

If the market supply and demand curves for computers include all costs or benefits, then in this case:

When an alternative to the current allocation of resources exists that would increase society's welfare:

A normal market supply curve reflects:

-(Exhibit: Market Failure 2)If a competitive market has an external cost of the amount AC, and if the government imposes a fee to cover the cost, the market will achieve the equilibrium point:

Which of the following is a public good?

If the marginal benefit received from a good is equal to the marginal cost of production, then:

Which of the following statements is (are)true?

The _______ is the amount by which an additional unit of an activity increases its total benefit.

-(Exhibit: Marginal Benefit, Marginal Cost, and Net Benefit)In Panel (c), if activity level is at J, then there will be a deadweight loss of _______ and a net benefit of _______ .

Market efficiency requires exclusive, but not transferable, property rights.

The Demand for Golf Balls Demand Price (per dozen) Quantity (dozen) 20 0 18 1 16 2 14 3 12 4 10 5 -(Exhibit: The Demand for Golf Balls)Assume that 5 dozen golf balls are purchased for $10 per dozen.Consumer surplus is:

Public goods are goods for which the cost of exclusion is prohibitive.

According to the marginal decision rule, if marginal benefit:

The net gain of an activity will be minimized at the point at which the MB equals the MC of the activity.

Based on the type of analysis described in the Case in Point on Preventing Oil Spills, an economist might reasonably argue that too few people die in airplane crashes if:

Maximizing choices must be made within the parameters imposed by some constraint.

According to the marginal decision rule, if marginal benefit:

If the price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $10 to spend and decide to purchase 8 bags of peanuts, the maximum quantity of popcorn that you can purchase is _______ boxes.

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Inflation and Unemployment

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Macroeconomics: the Big Picture

Measuring Total Income and Output

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Macro Inflation and Unemployment

Macro a Brief History of Macroeconomic Thought and Policy

Economic Development

Socialist Economies in Transition

Filters

-(Exhibit: Marginal Benefit, Marginal Cost, and Net Benefit)In Panel (c), if activity level is at J, then there will be a deadweight loss of _ and a net benefit of _ .