Question 1

In a planned economy the concept of efficiency is

Accepted Answer

A)  more important than in a market economy.
B)  less important than in a market economy.
C)  not important at all.
D)  as important as in a market economy.

Question 2

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. C

Question 3

The price of a ride on the Washington, D.C.metro depends on the time of day you ride.This is an example of

Accepted Answer

A)  exploitation.
B)  inefficiency.
C)  political interference with a market.
D)  pricing to spread out demand.

Question 4

Central planners in command economies

Accepted Answer

A)  generally set production targets for firms.
B)  always consult consumers on the output of goods they want to consume.
C)  allow prices to organize the economy's production.
D)  depend upon the invisible hand to coordinate economic activities.

Question 5

"Peak" pricing can best be defined as

Accepted Answer

A)  setting higher prices to reflect higher demand.
B)  pricing to obtain maximum profit.
C)  setting price higher when demand is more elastic.
D)  raising price to determine elasticity.

Question 6

Keeping landing fees low at airports during the "peak" hours

Accepted Answer

A)  perpetuates congestion during those hours.
B)  is politically unpopular.
C)  contributes to efficient allocation of airport facilities.
D)  would lessen the problem of delayed flight landings.

Question 7

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will ____, with the likely result that marginal utility will ____.

Accepted Answer

A)  rise; fall 
B)  fall; rise 
C)  rise; rise 
D)  fall; fall

Question 8

When prices of products are set below equilibrium,

Accepted Answer

A)  society's resources are inefficiently allocated.
B)  firms expand output to increase profits.
C)  firms earn excessively high profits.
D)  consumers benefit from surpluses of cheap goods.

Question 9

Under laissez faire, society's decisions about how much of every product to produce depend on

Accepted Answer

A)  consumer preferences only.
B)  production costs only.
C)  consumer preferences and production costs.
D)  neither consumer preferences nor production costs.

Question 10

An optimal allocation of resources is one which is:

Accepted Answer

A)  unfair.
B)  fair.
C)  efficient.
D)  inefficient.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

If the poor cannot afford proper medical treatment, an economist, for reasons of efficiency, would favor

Accepted Answer

A)  giving the poor added income to spend as they see fit.
B)  paying doctors bonuses to treat the poor.
C)  paying the medical bills of the poor.
D)  giving the poor "medical stamps."

Question 13

Under perfect competition, the market mechanism, without any government regulation, is capable of

Accepted Answer

A)  allocating resources efficiently.
B)  solving equity problems.
C)  making the average cost of labor equal to the average cost of all commodities.
D)  making more income available to the poor. A

Question 14

Central planning is an efficient method for making coordination decisions.

Accepted Answer

A) True 
 B)False

Question 15

Command economies are able to achieve greater allocative efficiency than market economies.

Accepted Answer

A) True 
 B)False

Question 16

Under laissez faire, the allocation of scarce resources among the different industries

Accepted Answer

A)  is possible only with government tax and subsidy policies.
B)  is accomplished by the price system.
C)  requires a considerable amount of central planning.
D)  is the result of consumer planning.

Question 17

Input-output analysis is rarely used because

Accepted Answer

A)  it requires tremendously complex calculations.
B)  it requires large amounts of data.
C)  market economies can instead rely on the price mechanism to organize production.
D)  All of the above are correct.

Question 18

Under a laissez-faire system,

Accepted Answer

A)  government organizes production and distribution of goods.
B)  a small bureaucracy of central planners tells firms what to produce and how to produce it.
C)  costs of production and consumers' demands determine the output mix.
D)  firms try to produce the goods that they think are good for consumers. C

Question 19

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

Accepted Answer

A)  Administered system 
B)  Government 
C)  Price system 
D)  Central planning

Question 20

Economists believe having higher prices for scarcer resources promotes efficiency.

Accepted Answer

A) True 
 B)False

Exam 14: The Case for Free Markets: the Price System

In a planned economy the concept of efficiency is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedC

The price of a ride on the Washington, D.C.metro depends on the time of day you ride.This is an example of

Correct AnswerverifiedShow Answer

Central planners in command economies

Correct AnswerverifiedShow Answer

"Peak" pricing can best be defined as

Correct AnswerverifiedShow Answer

Keeping landing fees low at airports during the "peak" hours

Correct AnswerverifiedShow Answer

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will ____, with the likely result that marginal utility will ____.

Correct AnswerverifiedShow Answer

When prices of products are set below equilibrium,

Correct AnswerverifiedShow Answer

Under laissez faire, society's decisions about how much of every product to produce depend on

Correct AnswerverifiedShow Answer

An optimal allocation of resources is one which is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the poor cannot afford proper medical treatment, an economist, for reasons of efficiency, would favor

Correct AnswerverifiedShow Answer

Under perfect competition, the market mechanism, without any government regulation, is capable of

Correct AnswerverifiedA

Central planning is an efficient method for making coordination decisions.

Correct AnswerverifiedShow Answer

Command economies are able to achieve greater allocative efficiency than market economies.

Correct AnswerverifiedShow Answer

Under laissez faire, the allocation of scarce resources among the different industries

Correct AnswerverifiedShow Answer

Input-output analysis is rarely used because

Correct AnswerverifiedShow Answer

Under a laissez-faire system,

Correct AnswerverifiedC

Which of the following carries out the distribution process by rationing goods on the basis of preferences and relative incomes?

Correct AnswerverifiedShow Answer

Economists believe having higher prices for scarcer resources promotes efficiency.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will , with the likely result that marginal utility will .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified