Question 1

Net benefit can be maximized by equating:

Accepted Answer

A) total benefit to total cost. 
B) marginal benefit to marginal cost. 
C) marginal benefit to total cost. 
D) total benefit to marginal cost. 
A) total benefit to total cost. 
B) marginal benefit to marginal cost. 
C) marginal benefit to total cost. 
D) total benefit to marginal cost.

Question 2

-(Exhibit: Marginal Benefits and Marginal Costs)In the exhibit, more time spent studying economics adds points to economics scores but subtracts points from accounting scores.The student in this example would maximize net benefits by studying economics for _______ hours.

Accepted Answer

A) 0 
B) 2 
C) 4 
D) 6 
A) 0 
B) 2 
C) 4 
D) 6

Question 3

An economist might say that the United States doesn't have enough oil spills in its rivers if it were determined that:

Accepted Answer

A) fewer than 1 million fish were being killed by oil spills each year. 
B) the marginal benefits of more oil pollution in the river outweighed the marginal cost of preventing or cleaning up the oil spill pollution. 
C) the marginal benefits of less oil pollution in the river were less than the marginal cost of reducing the amount of oil spilled at that level. 
D) both B and C would lead an economist to that conclusion. 
A) fewer than 1 million fish were being killed by oil spills each year. 
B) the marginal benefits of more oil pollution in the river outweighed the marginal cost of preventing or cleaning up the oil spill pollution. 
C) the marginal benefits of less oil pollution in the river were less than the marginal cost of reducing the amount of oil spilled at that level. 
D) both B and C would lead an economist to that conclusion.

Question 4

A key element that a public good displays is:

Accepted Answer

A) government production. 
B) government provision. 
C) payment through taxes 
D) nonexclusion. 
A) government production. 
B) government provision. 
C) payment through taxes 
D) nonexclusion.

Question 5

Profit is the difference between _______ and _______ .

Accepted Answer

A) total sales; total revenues 
B) total profits; total costs 
C) total revenues; total costs 
D) marginal costs; marginal revenues 
A) total sales; total revenues 
B) total profits; total costs 
C) total revenues; total costs 
D) marginal costs; marginal revenues

Question 6

In order to maximize net benefit, consumers and firms evaluate each activity at the:

Accepted Answer

A) average. 
B) top. 
C) margin. 
D) end. 
A) average. 
B) top. 
C) margin. 
D) end.

Question 7

-(Exhibit: Markets and Efficiency)Refer to Panel (c).Given the shift in supply from S1 to S2, which of the following statements is (are)true?

Accepted Answer

A) The rising price tells consumers that the marginal benefit of apples is falling. 
B) The marginal benefit of consuming the same amount of apples at a higher price is more than the marginal costs. 
C) Consumers cut back on their consumption of apples. 
D) All of the above are true. 
A) The rising price tells consumers that the marginal benefit of apples is falling. 
B) The marginal benefit of consuming the same amount of apples at a higher price is more than the marginal costs. 
C) Consumers cut back on their consumption of apples. 
D) All of the above are true.

Question 8

If an activity generates external costs, the decisionmakers generating the activity will:

Accepted Answer

A) be faced with its full costs. 
B) be faced with no costs. 
C) not be faced with its full costs. 
D) be faced with excesive costs. 
A) be faced with its full costs. 
B) be faced with no costs. 
C) not be faced with its full costs. 
D) be faced with excesive costs.

Question 9

Maximizing choices must be made within parameters imposed by:

Accepted Answer

A) a constraint. 
B) a boundary. 
C) a limit. 
D) all of the above. 
A) a constraint. 
B) a boundary. 
C) a limit. 
D) all of the above.

Question 10

An efficient allocation of resources implies _______ allocation of goods and services.

Accepted Answer

A) an equitable 
B) an inequitable 
C) neither an equitable nor an inequitable 
D) a maximum 
A) an equitable 
B) an inequitable 
C) neither an equitable nor an inequitable 
D) a maximum

Question 11

If external costs exist, the competitive free market:

Accepted Answer

A) allocates resources inefficiently. 
B) allocates resources efficiently. 
C) automatically corrects an overallocation of resources. 
D) automatically corrects an underallocation of resources. 
A) allocates resources inefficiently. 
B) allocates resources efficiently. 
C) automatically corrects an overallocation of resources. 
D) automatically corrects an underallocation of resources.

Question 12

An efficient allocation of resources is one that maximizes the net benefits of each activity.

Accepted Answer

A) True 
 B)False

Question 13

An exclusive property right is one that:

Accepted Answer

A) lets anyone use a resource without cost to society. 
B) allows its owners to prevent others from using a resource. 
C) equates marginal benefits to marginal costs. 
D) can be sold or leased to someone else. 
A) lets anyone use a resource without cost to society. 
B) allows its owners to prevent others from using a resource. 
C) equates marginal benefits to marginal costs. 
D) can be sold or leased to someone else.

Question 14

Suppose that external costs are not fully reflected in the market price of a good.This is an indication of market:

Accepted Answer

A) failure. 
B) equilibrium. 
C) efficiency. 
D) optimality. 
A) failure. 
B) equilibrium. 
C) efficiency. 
D) optimality.

Question 15

If an economic activity results in external costs as well as private costs, economic theory would suggest that this activity should:

Accepted Answer

A) be taxed. 
B) be prohibited. 
C) be subsidized. 
D) not be allowed. 
A) be taxed. 
B) be prohibited. 
C) be subsidized. 
D) not be allowed.

Question 16

When the net benefits of all economic activities are maximized, economists say the allocation of resources is _______ .

Accepted Answer

A) inefficient 
B) correct 
C) efficient 
D) well done 
A) inefficient 
B) correct 
C) efficient 
D) well done

Question 17

The market for apples achieves an efficient allocation of resources when prices respond and send signals to producers and consumers.That set of interactions requires that producers possess:

Accepted Answer

A) lobby access to government. 
B) monopoly power. 
C) property rights to the apples they grow. 
D) the ability to set any price they choose for their apples. 
A) lobby access to government. 
B) monopoly power. 
C) property rights to the apples they grow. 
D) the ability to set any price they choose for their apples.

Question 18

The marginal cost of an additional unit of a private good is zero.

Accepted Answer

A) True 
 B)False

Question 19

Automobile emissions generate pollution and cause higher costs and discomfort to residents of a city.In this case:

Accepted Answer

A) too few of society's resources are being used to operate automobiles. 
B) the externality can be internalized into the market by imposing a specific tax on drivers. 
C) there is an external benefit to society from operating automobiles. 
D) the externality can be internalized into the market by granting a specific subsidy to drivers. 
A) too few of society's resources are being used to operate automobiles. 
B) the externality can be internalized into the market by imposing a specific tax on drivers. 
C) there is an external benefit to society from operating automobiles. 
D) the externality can be internalized into the market by granting a specific subsidy to drivers.

Question 20

A good for which exclusion is possible and for which the marginal cost of another user ispositive is a _______ good.

Accepted Answer

A) private 
B) free 
C) nonmarket 
D) public 
A) private 
B) free 
C) nonmarket 
D) public

Exam 6: Measuring Total Output and Income

Net benefit can be maximized by equating:

-(Exhibit: Marginal Benefits and Marginal Costs)In the exhibit, more time spent studying economics adds points to economics scores but subtracts points from accounting scores.The student in this example would maximize net benefits by studying economics for _______ hours.

An economist might say that the United States doesn't have enough oil spills in its rivers if it were determined that:

A key element that a public good displays is:

Profit is the difference between _______ and _______ .

In order to maximize net benefit, consumers and firms evaluate each activity at the:

-(Exhibit: Markets and Efficiency)Refer to Panel (c).Given the shift in supply from S1 to S2, which of the following statements is (are)true?

If an activity generates external costs, the decisionmakers generating the activity will:

Maximizing choices must be made within parameters imposed by:

An efficient allocation of resources implies _______ allocation of goods and services.

If external costs exist, the competitive free market:

An efficient allocation of resources is one that maximizes the net benefits of each activity.

An exclusive property right is one that:

Suppose that external costs are not fully reflected in the market price of a good.This is an indication of market:

If an economic activity results in external costs as well as private costs, economic theory would suggest that this activity should:

When the net benefits of all economic activities are maximized, economists say the allocation of resources is _______ .

The market for apples achieves an efficient allocation of resources when prices respond and send signals to producers and consumers.That set of interactions requires that producers possess:

The marginal cost of an additional unit of a private good is zero.

Automobile emissions generate pollution and cause higher costs and discomfort to residents of a city.In this case:

A good for which exclusion is possible and for which the marginal cost of another user ispositive is a _______ good.

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

Profit is the difference between _ and _ .

-(Exhibit: Markets and Efficiency)Refer to Panel (c).Given the shift in supply from S₁ to S₂, which of the following statements is (are)true?