Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

There is only one efficient allocation of resources in an economy at one point in time.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following functions is not performed by prices in a free market?

Accepted Answer

A) Guiding the allocation of resources 
B) Conveying information about the marginal cost of production 
C) Making the distribution of income more equitable 
D) Replacing the need for governmental supervision of production 
A) Guiding the allocation of resources 
B) Conveying information about the marginal cost of production 
C) Making the distribution of income more equitable 
D) Replacing the need for governmental supervision of production C

Question 4

An economist would say the price is too high for a certain service if

Accepted Answer

A) poor people couldn't afford to buy it. 
B) nobody could afford to buy it. 
C) the price was above marginal cost. 
D) it is an essential service and consumes a significant share of income. 
A) poor people couldn't afford to buy it. 
B) nobody could afford to buy it. 
C) the price was above marginal cost. 
D) it is an essential service and consumes a significant share of income.

Question 5

The nation listed below whose economy currently comes closest to a free market is

Accepted Answer

A) North Korea. 
B) Germany. 
C) People's Republic of China. 
D) Cuba. 
A) North Korea. 
B) Germany. 
C) People's Republic of China. 
D) Cuba.

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. 
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.

Question 7

The existence of a universal law of scarcity creates pressures on societies to

Accepted Answer

A) use their resources according to government plans. 
B) economize in the use of their resources. 
C) allocate their resources equitably. 
D) exploit their resources. 
A) use their resources according to government plans. 
B) economize in the use of their resources. 
C) allocate their resources equitably. 
D) exploit their resources.

Question 8

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. 
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 9

In a free-market economy, prices coordinate society's decisions about

Accepted Answer

A) how and for whom to produce. 
B) what, how, and for whom to produce. 
C) how and for whom to produce but not how much to produce. 
D) how much and for whom to produce but not how to produce. 
A) how and for whom to produce. 
B) what, how, and for whom to produce. 
C) how and for whom to produce but not how much to produce. 
D) how much and for whom to produce but not how to produce.

Question 10

Total surplus is in which type of market will be highest?

Accepted Answer

A) Perfect competition 
B) Monopoly 
C) Equally in perfect competition and monopoly 
D) Natural monopoly 
A) Perfect competition 
B) Monopoly 
C) Equally in perfect competition and monopoly 
D) Natural monopoly

Question 11

The selection of particular products' production processes

Accepted Answer

A) determines the output of other products made with those inputs at the same time. 
B) is part of the distribution problem in an economy. 
C) is accomplished without regard to profit in a laissez-faire economy. 
D) depends upon plans for distribution of the products. 
A) determines the output of other products made with those inputs at the same time. 
B) is part of the distribution problem in an economy. 
C) is accomplished without regard to profit in a laissez-faire economy. 
D) depends upon plans for distribution of the products.

Question 12

The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)

Accepted Answer

A) budget line. 
B) indifference curve. 
C) production possibilities frontier. 
D) marginal cost curve. 
A) budget line. 
B) indifference curve. 
C) production possibilities frontier. 
D) marginal cost curve.

Question 13

The production possibilities frontier cannot be used to show

Accepted Answer

A) scarcity in a society. 
B) the trade-offs involved in production decisions. 
C) the unequal distribution of resources among the members of society. 
D) All of the responses are correct. 
A) scarcity in a society. 
B) the trade-offs involved in production decisions. 
C) the unequal distribution of resources among the members of society. 
D) All of the responses are correct.

Question 14

Before a market allocation of goods on the production possibilities curve can be judged efficient, one must evaluate "what" goods the market produced.

Accepted Answer

A) True 
 B)False

Question 15

The price mechanism solves the "for whom" problem by assigning high prices to goods in high demand and letting customers choose whether to purchase them.

Accepted Answer

A) True 
 B)False

Question 16

Government-imposed limits on price movements are likely to

Accepted Answer

A) increase economic efficiency. 
B) decrease economic efficiency. 
C) leave economic efficiency unchanged. 
D) promote economic growth in the economy. 
A) increase economic efficiency. 
B) decrease economic efficiency. 
C) leave economic efficiency unchanged. 
D) promote economic growth in the economy.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

If parking spaces on a college campus are scarce, with quantity demanded during the "peak" hours, from 8 a.m. to 11 a.m., far greater than the number of spaces, an economist would propose as an efficient solution,

Accepted Answer

A) lowering the parking fees during those hours to compensate students for the longer search time. 
B) charging the same parking fees during all hours of the school day. 
C) raising parking fees during the peak hours to encourage some students to schedule classes during other hours when parking fees are lower. 
D) hiring more security guards to patrol for illegal parkers. 
A) lowering the parking fees during those hours to compensate students for the longer search time. 
B) charging the same parking fees during all hours of the school day. 
C) raising parking fees during the peak hours to encourage some students to schedule classes during other hours when parking fees are lower. 
D) hiring more security guards to patrol for illegal parkers.

Question 19

The allocation of resources is efficient under an idealized free market system.

Accepted Answer

A) True 
 B)False

Question 20

Assuming one can derive a correct input-output table, are there still any reasons to prefer the market to central planning?

Accepted Answer

The market reflects consumer choice. The

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

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

There is only one efficient allocation of resources in an economy at one point in time.

Which of the following functions is not performed by prices in a free market?

An economist would say the price is too high for a certain service if

The nation listed below whose economy currently comes closest to a free market is

Prices serve the public interest by

The existence of a universal law of scarcity creates pressures on societies to

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

In a free-market economy, prices coordinate society's decisions about

Total surplus is in which type of market will be highest?

The selection of particular products' production processes

The graphical device that illustrates the concept of scarce resources being efficiently utilized in the economy is a(n)

The production possibilities frontier cannot be used to show

Before a market allocation of goods on the production possibilities curve can be judged efficient, one must evaluate "what" goods the market produced.

The price mechanism solves the "for whom" problem by assigning high prices to goods in high demand and letting customers choose whether to purchase them.

Government-imposed limits on price movements are likely to

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

If parking spaces on a college campus are scarce, with quantity demanded during the "peak" hours, from 8 a.m. to 11 a.m., far greater than the number of spaces, an economist would propose as an efficient solution,

The allocation of resources is efficient under an idealized free market system.

Assuming one can derive a correct input-output table, are there still any reasons to prefer the market to central planning?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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