Question 1

After the Arab oil embargoes, there was concern about the impact of higher gas prices on the low-income worker.The government imposed price controls on oil to protect the poor from this situation.Explain the inefficiency of this price ceiling and how taxes, rather than prices, could be used to solve the problem.

Accepted Answer

By preventing the price of gas from risi...

Question 2

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.E) All of the above
F) B) and C)

Question 3

Which of the following statements is correct?

Accepted Answer

A)  Low prices may not always be in the public interest.
B)  If prices on scarce resources are set "too low," consumers will receive the "wrong" signals and be encouraged to consume more, thus squandering resources.
C)  Raising prices on scarce resources is generally politically unpopular.
D)  All of the above are correct.E) A) and D)
F) B) and C)

Question 4

Higher prices

Accepted Answer

A)  are always against the public interest.
B)  may sometimes serve the public interest.
C)  should never be allowed.
D)  occur automatically for abundant goods.E) All of the above
F) B) and D)

Question 5

If the marginal utility of a product exceeds its MC, we would want, on efficiency grounds, to

Accepted Answer

A)  increase production.
B)  decrease production.
C)  leave production constant.
D)  One cannot tell without knowing the price.E) None of the above
F) A) and D)

Question 6

Efficient allocation of resources makes everyone better off.

Accepted Answer

A) True 
 B)False

Question 7

Lower prices are always better for society.

Accepted Answer

A) True 
 B)False

Question 8

The price system automatically leads to an efficient allocation of inputs among the different production processes.

Accepted Answer

A) True 
 B)False

Question 9

In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by

Accepted Answer

A)  the government.
B)  businessmen.
C)  the price system.
D)  workers.E) B) and D)
F) C) and D)

Question 10

Price increases always reduce economic efficiency.

Accepted Answer

A) True 
 B)False

Question 11

In the case of the production of electronic calculators, introduced in the United States in the 1960s,

Accepted Answer

A)  a technological breakthrough reduced the input quantities needed to produce them.
B)  quantity demanded increased significantly as prices fell.
C)  production costs fell with advances in technology.
D)  All of the above are correct.E) All of the above
F) None of the above

Question 12

Most economists support the idea of peak-load pricing on the grounds of

Accepted Answer

A)  fairness in income distribution.
B)  efficiency in input usage.
C)  equality of opportunity.
D)  efficiency in output allocation.E) C) and D)
F) A) and D)

Question 13

The price system rations goods among consumers in such a way that

Accepted Answer

A)  all are treated equally.
B)  all needs are satisfied.
C)  the rich are favored.
D)  important needs are satisfied first.E) All of the above
F) A) and B)

Question 14

When the price of the product falls

Accepted Answer

A)  consumer's surplus remains the same.
B)  producers' surplus increases.
C)  consumer's surplus falls.
D)  producer's surplus falls.E) None of the above
F) A) and B)

Question 15

Which type of economic system will produce the highest degree of allocative efficiency?

Accepted Answer

A)  a perfectly competitive market system
B)  a purely command economic system
C)  a market system with limited price controls and price ceilings
D)  a command system with limited market activity for non-essentialsE) A) and B)
F) C) and D)

Question 16

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.No corresponding factory produces only right shoes.This outcome is an example of inefficiency in

Accepted Answer

A)  output selection.
B)  production planning.
C)  product distribution.
D)  market segmentation.E) B) and D)
F) B) and C)

Question 17

Market systems can be evaluated as efficient or inefficient, but not as fair or unfair.

Accepted Answer

A) True 
 B)False

Question 18

Economics tells us which resource allocations are preferable.

Accepted Answer

A) True 
 B)False

Question 19

An unplanned economy operating under laissez faire

Accepted Answer

A)  allocates resources by market supply and demand.
B)  cannot respond to basic questions about production and distribution.
C)  shows breakdowns with frequent surpluses and shortages.
D)  allocates goods and services under government subsidy.E) A) and D)
F) A) and C)

Question 20

"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.E) C) and D)
F) None of the above

Exam 14: The Case for Free Markets the Price System

Price increases always reduce economic efficiency.

Correct Answer
verified

In the case of the production of electronic calculators, introduced in the United States in the 1960s,

Correct Answer
verified

In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by

Correct Answer
verified

Which type of economic system will produce the highest degree of allocative efficiency?

Correct Answer
verified

Efficient allocation of resources makes everyone better off.

Correct Answer
verified

Lower prices are always better for society.

Correct Answer
verified

Correct Answer
verified
By preventing the price of gas from risi...
View Answer

An unplanned economy operating under laissez faire

Correct Answer
verified

Higher prices

Correct Answer
verified

Market systems can be evaluated as efficient or inefficient, but not as fair or unfair.

Correct Answer
verified

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.No corresponding factory produces only right shoes.This outcome is an example of inefficiency in

Correct Answer
verified

Central planners in command economies

Correct Answer
verified

Economics tells us which resource allocations are preferable.

Correct Answer
verified

The price system automatically leads to an efficient allocation of inputs among the different production processes.

Correct Answer
verified

When the price of the product falls

Correct Answer
verified

Most economists support the idea of peak-load pricing on the grounds of

Correct Answer
verified

"Peak" pricing can best be defined as

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

If the marginal utility of a product exceeds its MC, we would want, on efficiency grounds, to

Correct Answer
verified

The price system rations goods among consumers in such a way that

Correct Answer
verified

Exam 14: The Case for Free Markets the Price System

Price increases always reduce economic efficiency.

Correct AnswerverifiedShow Answer

In the case of the production of electronic calculators, introduced in the United States in the 1960s,

Correct AnswerverifiedShow Answer

In a competitive economy, the questions of what, how, and for whom to produce tend to be regulated by

Correct AnswerverifiedShow Answer

Which type of economic system will produce the highest degree of allocative efficiency?

Correct AnswerverifiedShow Answer

Efficient allocation of resources makes everyone better off.

Correct AnswerverifiedShow Answer

Lower prices are always better for society.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBy preventing the price of gas from risi...View AnswerShow Answer

An unplanned economy operating under laissez faire

Correct AnswerverifiedShow Answer

Higher prices

Correct AnswerverifiedShow Answer

Market systems can be evaluated as efficient or inefficient, but not as fair or unfair.

Correct AnswerverifiedShow Answer

A factory in a centrally planned economy produces 1,000 left shoes and no right shoes.No corresponding factory produces only right shoes.This outcome is an example of inefficiency in

Correct AnswerverifiedShow Answer

Central planners in command economies

Correct AnswerverifiedShow Answer

Economics tells us which resource allocations are preferable.

Correct AnswerverifiedShow Answer

The price system automatically leads to an efficient allocation of inputs among the different production processes.

Correct AnswerverifiedShow Answer

When the price of the product falls

Correct AnswerverifiedShow Answer

Most economists support the idea of peak-load pricing on the grounds of

Correct AnswerverifiedShow Answer

"Peak" pricing can best be defined as

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If the marginal utility of a product exceeds its MC, we would want, on efficiency grounds, to

Correct AnswerverifiedShow Answer

The price system rations goods among consumers in such a way that

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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verified
By preventing the price of gas from risi...
View Answer

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