Question 1

If the marginal benefit received from a good is less than the marginal cost of production, then:

Accepted Answer

A)  society's well-being can be improved if production increases. 
B)  society's well-being cannot be improved by changing production. 
C)  the market is producing too much of the good. 
D)  the market is producing too little of the good. 
A)  society's well-being can be improved if production increases. 
B)  society's well-being cannot be improved by changing production. 
C)  the market is producing too much of the good. 
D)  the market is producing too little of the good. C

Question 2

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. D

Question 3

Use the following to answer question(s): Surplus and Demand
  
-(Exhibit: Surplus and Demand) The market demand curve can be considered to be a _______ curve.

Accepted Answer

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

Question 4

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 5

A common property resource has exclusive property rights.

Accepted Answer

A) True 
 B)False

Question 6

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 7

An allocation of resources that does not achieve the maximum net benefit from one or more activities is:

Accepted Answer

A)  inefficient. 
B)  external. 
C)  internal. 
D)  efficient. 
A)  inefficient. 
B)  external. 
C)  internal. 
D)  efficient.

Question 8

If a coal-powered electrical generator discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town, this situation is an example of a(n):

Accepted Answer

A)  quasi-public good. 
B)  external cost. 
C)  external benefit. 
D)  specific tax. 
A)  quasi-public good. 
B)  external cost. 
C)  external benefit. 
D)  specific tax.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If the price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $5 to spend and decide to purchase 8 boxes of popcorn, the maximum quantity of peanuts that you can purchase is _______ bags.

Accepted Answer

A)  4 
B)  8 
C)  10 
D)  12 
A)  4 
B)  8 
C)  10 
D)  12

Question 11

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 12

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 13

An inefficient allocation of resources will occur when:

Accepted Answer

A)  decisionmakers are faced with the costs and benefits of their actions. 
B)  there are clearly defined property rights. 
C)  no alternative exists that would increase the welfare of society. 
D)  decisionmakers are not faced with the benefits and costs of their choices. 
A)  decisionmakers are faced with the costs and benefits of their actions. 
B)  there are clearly defined property rights. 
C)  no alternative exists that would increase the welfare of society. 
D)  decisionmakers are not faced with the benefits and costs of their choices.

Question 14

Use the following to answer question(s): Model of a Competitive Market
  
-(Exhibit: Model of a Competitive Market) If there are external costs:

Accepted Answer

A)  resources will be underallocated to the production of the good. 
B)  resources will be overallocated to the production of the good. 
C)  resources will be allocated efficiently to the production of the good. 
D)  the price at P will be higher than if there were no external costs. 
A)  resources will be underallocated to the production of the good. 
B)  resources will be overallocated to the production of the good. 
C)  resources will be allocated efficiently to the production of the good. 
D)  the price at P will be higher than if there were no external costs.

Question 15

An inequitable allocation of resources implies an equitable distribution of wealth.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer question(s): Net Benefit
  
-(Exhibit: Net Benefit) Net benefit is the area:

Accepted Answer

A)  ACD. 
B)  ABDE. 
C)  BCD. 
D)  OBDE. 
A)  ACD. 
B)  ABDE. 
C)  BCD. 
D)  OBDE.

Question 17

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 18

Use the following to answer question(s): Markets and Efficiency
  
-(Exhibit: Markets and Efficiency) A producer will produce additional apples:

Accepted Answer

A)  as long as marginal benefit is less than marginal cost. 
B)  as long as marginal benefit exceeds marginal cost. 
C)  if marginal cost is decreasing and price is the same. 
D)  if price does not cover costs. 
A)  as long as marginal benefit is less than marginal cost. 
B)  as long as marginal benefit exceeds marginal cost. 
C)  if marginal cost is decreasing and price is the same. 
D)  if price does not cover costs.

Question 19

The Case in Point on Preventing Oil Spills stated that an economist who studied the costs and benefits of preventing oil spills in coastal waters and rivers concluded that:

Accepted Answer

A)  the marginal cost of preventing oil spills was greater than the marginal benefit and the U.S.Coast Guard could not justify its excessive prevention efforts. 
B)  The marginal cost of preventing oil spills was less than the marginal benefit and that the U.S.Cost Guard could justify even greater efforts at preventing them. 
C)  that oil spills are so terrible and have such a pervasively destructive impact on the coastal waters and rivers that they should be prevented entirely-no oil spills should be tolerated. 
D)  both B and C were conclusions reached by the economist. 
A)  the marginal cost of preventing oil spills was greater than the marginal benefit and the U.S.Coast Guard could not justify its excessive prevention efforts. 
B)  The marginal cost of preventing oil spills was less than the marginal benefit and that the U.S.Cost Guard could justify even greater efforts at preventing them. 
C)  that oil spills are so terrible and have such a pervasively destructive impact on the coastal waters and rivers that they should be prevented entirely-no oil spills should be tolerated. 
D)  both B and C were conclusions reached by the economist.

Question 20

The efficient way to deal with an external cost is to let markets allocate resources without government intervention.

Accepted Answer

A) True 
 B)False

If the marginal benefit received from a good is less than the marginal cost of production, then:

A key element that a public good displays is:

Use the following to answer question(s): Surplus and Demand -(Exhibit: Surplus and Demand) The market demand curve can be considered to be a _______ curve.

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.

A common property resource has exclusive property rights.

Which of the following statements is (are) true?

An allocation of resources that does not achieve the maximum net benefit from one or more activities is:

If a coal-powered electrical generator discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town, this situation is an example of a(n):

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

If the price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $5 to spend and decide to purchase 8 boxes of popcorn, the maximum quantity of peanuts that you can purchase is _______ bags.

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

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:

An inefficient allocation of resources will occur when:

Use the following to answer question(s): Model of a Competitive Market -(Exhibit: Model of a Competitive Market) If there are external costs:

An inequitable allocation of resources implies an equitable distribution of wealth.

Use the following to answer question(s): Net Benefit -(Exhibit: Net Benefit) Net benefit is the area:

According to the marginal decision rule, if marginal benefit:

Use the following to answer question(s): Markets and Efficiency -(Exhibit: Markets and Efficiency) A producer will produce additional apples:

The Case in Point on Preventing Oil Spills stated that an economist who studied the costs and benefits of preventing oil spills in coastal waters and rivers concluded that:

The efficient way to deal with an external cost is to let markets allocate resources without government intervention.

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

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

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 6: Markets, Maximizers, and Efficiency

If the marginal benefit received from a good is less than the marginal cost of production, then:

A key element that a public good displays is:

Use the following to answer question(s): Surplus and Demand -(Exhibit: Surplus and Demand) The market demand curve can be considered to be a _______ curve.

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.

A common property resource has exclusive property rights.

Which of the following statements is (are) true?

An allocation of resources that does not achieve the maximum net benefit from one or more activities is:

If a coal-powered electrical generator discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town, this situation is an example of a(n):

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

If the price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $5 to spend and decide to purchase 8 boxes of popcorn, the maximum quantity of peanuts that you can purchase is _______ bags.

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

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:

An inefficient allocation of resources will occur when:

Use the following to answer question(s): Model of a Competitive Market -(Exhibit: Model of a Competitive Market) If there are external costs:

An inequitable allocation of resources implies an equitable distribution of wealth.

Use the following to answer question(s): Net Benefit -(Exhibit: Net Benefit) Net benefit is the area:

According to the marginal decision rule, if marginal benefit:

Use the following to answer question(s): Markets and Efficiency -(Exhibit: Markets and Efficiency) A producer will produce additional apples:

The Case in Point on Preventing Oil Spills stated that an economist who studied the costs and benefits of preventing oil spills in coastal waters and rivers concluded that:

The efficient way to deal with an external cost is to let markets allocate resources without government intervention.

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

The Analysis of Consumer Choice

Production and Cost

Competitive Markets for Goods and Services

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

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters