True / False
1. Efficient allocation of resources makes everyone better off.
a.
True
b.
False
True
Easy
DISC: Costs of production
United States – BPROG: Analytic
Costs of production
Efficient Resource Allocation and Pricing
2. Scarcity limits the volume of goods that an economic system can produce, but does not limit the production of services.
a.
True
b.
False
False
Moderate
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPROG: Analytic
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Efficient Resource Allocation and Pricing
3. Scarcity is illustrated graphically by a production possibilities frontier.
a.
True
b.
False
True
Easy
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPROG: Analytic
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Efficient Resource Allocation and Pricing
4. Points below the production possibilities frontier are inefficient because it is possible to make someone better off
without making anyone else worse off.
a.
True
b.
False
True
Easy
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
5. Economics tells us which resource allocations are preferable.
a.
True
b.
False
False
Easy
6. There is only one efficient allocation of resources in an economy at one point in time.
a.
True
b.
False
False
Easy
7. Price increases always reduce economic efficiency.
a.
True
b.
False
False
Moderate
8. Price decreases always increase economic efficiency.
a.
True
b.
False
False
Moderate
9. Economists believe having higher prices for scarcer resources promotes efficiency.
a.
True
b.
False
True
Easy
10. Lower prices are always better for society.
a.
True
b.
False
False
Easy
11. Prices set too low can actually be against the public interest.
a.
True
b.
False
True
Moderate
12. Higher prices can discourage use/consumption, which in turn may better allocate scarce resources.
a.
True
b.
False
True
Easy
13. Higher efficiency in the economy can be reached if prices are held low by law.
a.
True
b.
False
False
Moderate
14. In a market system, prices are used to coordinate economic activity.
a.
True
b.
False
True
Easy
15. Laissez faire refers to a program of minimal interference in the market system.
a.
True
b.
False
True
Easy
16. Laissez faire is a policy that espouses central planning.
a.
True
b.
False
False
Easy
17. In a laissez-faire system, the price mechanism dictates the production planning decisions.
a.
True
b.
False
True
Moderate
18. Under a system of laissez faire, output selection is determined by consumers’ wants.
a.
True
b.
False
True
Easy
19. Central planning is an efficient method for making coordination decisions.
a.
True
b.
False
False
Easy
20. Distribution is a major question to be answered by any economic system.
a.
True
b.
False
True
Easy
21. High prices do not occur in laissez-faire markets.
a.
True
b.
False
False
Easy
22. The “invisible hand” refers to the control that government must exercise over a market economy.
a.
True
b.
False
False
Easy
23. Any increase in efficiency increases output available for distribution.
a.
True
b.
False
True
Moderate
24. Any increase in efficiency increases only profits of producers, with no increase in output.
a.
True
b.
False
False
Moderate
25. Centrally planned economies use free-market systems for their production planning.
a.
True
b.
False
False
Easy
26. Production planning without the market mechanism is very efficiently handled by central planners.
a.
True
b.
False
False
Moderate
27. 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.
a.
True
b.
False
Moderate
28. The price system takes into account consumer preferences in the distribution of goods and services.
a.
True
b.
False
True
Moderate
29. Command economies are able to achieve greater allocative efficiency than market economies.
a.
True
b.
False
False
Difficult
30. Input-output analysis was developed by Wassily Leontief.
a.
True
b.
False
True
Easy
31. Input-output analysis is a technique used to solve complicated market equations.
a.
True
b.
False
True
Easy
32. At the equilibrium point in a perfectly competitive industry, the total surplus (the sum of the consumer surplus and
producer surplus) will be at its maximum.
a.
True
b.
False
33. The producer’s surplus is equal to the difference between how much the seller can charge for a product and how much
the consumer is willing to purchase it for.
a.
True
b.
False
False
Easy
34. For a rational consumer, the consumer’s surplus will never be a negative number.
a.
True
b.
False
True
Moderate
35. With a monopoly, the consumer’s surplus is lower than it would be with a perfectly competitive industry.
a.
True
b.
False
36. With a monopoly, the total surplus is lower than it would be with a perfectly competitive industry.
a.
True
b.
False
37. The introduction of a tax in a perfectly competitive marketplace that is originally in equilibrium will lower total
surplus.
a.
True
b.
False
38. The introduction of a subsidy in a perfectly competitive marketplace that is originally in equilibrium will raise total
surplus.
a.
True
b.
False
39. The allocation of resources is efficient under an idealized free market system.
a.
True
b.
False
True
Moderate
40. Efficiency in the choice of outputs requires that marginal cost be equal to marginal revenue and nothing else.
a.
True
b.
False
False
Difficult
41. Under perfect competition, the lure of profits makes producers try to equate marginal cost and price.
a.
True
b.
False
True
Moderate
42. Fixed prices in a free-market economy can increase efficiency.
a.
True
b.
False
False
Moderate
43. To be efficient, outputs should be produced that minimize total cost.
a.
True
b.
False
False
Easy
44. Mutually beneficial trade is possible because of differing marginal utilities.
a.
True
b.
False
True
Moderate
45. Mutually beneficial trade is impossible when different persons have different preferences about goods and services.
a.
True
b.
False
False
Difficult
46. The price system automatically leads to an efficient allocation of inputs among the different production processes.
a.
True
b.
False
True
Moderate
47. Before a market allocation of goods on the production possibilities curve can be judged efficient, one must evaluate
“what” goods the market produced.
a.
True
b.
False
False
Moderate
48. The perfect competition price system is the most efficient because it equates MC = P = MU.
a.
True
b.
False
True
Easy
49. Uncoordinated decisions in perfect competition lead to mass confusion and inefficiency.
a.
True
b.
False
False
Moderate
50. For an efficient outcome, MR must exceed MC.
a.
True
b.
False
False
Easy
51. It is in society’s best interest that the MC of the last unit produced of a good is equal to its MU.
a.
True
b.
False
True
Easy
52. Prices influence the distribution of income by making the distribution fairer.
a.
True
b.
False
False
Easy
53. Market systems can be evaluated as efficient or inefficient, but not as fair or unfair.
a.
True
b.
False
True
Moderate
54. For any combination or outputs, there is an efficient allocation of income.
a.
True
b.
False
False
Easy
55. Economists can evaluate the desirability of the distribution of income.
a.
True
b.
False
False
Easy
56. Politicians and citizens may often choose policies that reduce economic efficiency because they are perceived as
“fairer.”
a.
True
b.
False
True
Moderate
57. “Fair” outcomes and “efficient” outcomes are always identical.
a.
True
b.
False
False
Moderate
58. “Peak pricing” can often improve economic efficiency.
a.
True
b.
False
True
Easy
59. “Peak pricing” involves setting lower prices at peak times so that people can afford a good or service.
a.
True
b.
False
False
Moderate
60. Free markets produce relatively high levels of efficiency but low rates of growth.
a.
True
b.
False
False
Moderate
61. Free markets produce allocatively efficient outcomes and have no flaws.
a.
True
b.
False
False
Easy
62. Politicians always agree with economists about the most efficient way of doing things.
a.
True
b.
False
False
Easy
63. Centrally planned economies do not use the price system for anything.
a.
True
b.
False
False
Moderate
64. The distribution process performed by the price system is not as efficient as the distribution process of central
planners.
a.
True
b.
False
False
Easy
65. Goods are distributed efficiently if everyone gets an equal share of each good.
a.
True
b.
False
False
Moderate
DISC: Supply and demand
United States – BPROG: Analytic
Supply and demand
Efficient Resource Allocation and Pricing
66. Input-output analysis is commonly used in production decisions.
a.
True
b.
False
False
Moderate
DISC: Costs of production
United States – BPROG: Analytic
Costs of production
Efficient Resource Allocation and Pricing
Multiple Choice
67. The slope of a typical production possibilities frontier reflects the fact that
a.
some systems of market organization are more efficient than others.
b.
the invisible hand always functions smoothly in a market system without government intervention.
c.
when resources are allocated efficiently, it’s impossible to produce more of anything without producing less of
something else.
d.
production is only possible when resources are allocated efficiently.
c
Moderate
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPROG: Analytic
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Efficient Resource Allocation and Pricing
68. The production possibilities frontier illustrates
a.
the constant rate of technological progress.
b.
the fundamental concept of scarcity.
c.
the rapid growth of the U.S. economy.
d.
that guns always trade for butter.
DISC: Scarcity, tradeoffs, and o – DISC: Scarcity, tradeoffs, and opportunity cost
United States – BPROG: Analytic
Scarcity, tradeoffs, and opportu – Scarcity, tradeoffs, and opportunity cost
Efficient Resource Allocation and Pricing
69. An efficient allocation of resources is demonstrated by a point
a.
above the production possibilities frontier.
b.
below the production possibilities frontier.
c.
on the production possibilities frontier.
d.
near the middle of the production possibilities frontier.
DISC: Measuring the Economy
United States – BPROG: Analytic
Measuring the Economy
Efficient Resource Allocation and Pricing
70. What does the production possibility curve imply about the resource allocation?
a.
Only some points on the curve are efficient.
b.
All points on the curve are equally efficient.
c.
A point which lies below the curve is more efficient.
d.
A point which lies above the curve is readily achievable.
DISC: Measuring the Economy
United States – BPROG: Reflective Thinking – BPROG: Analysis
Measuring the Economy
Efficient Resource Allocation and Pricing
71. Which type of economic system will produce the highest degree of allocative efficiency?
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-essentials
DISC: Measuring the Economy
United States – BPROG: Analytic
Measuring the Economy
Efficient Resource Allocation and Pricing
72. Which nation listed below is successfully transitioning from a planned economy to a hybrid market economy?
a.
People’s Republic of China.
b.
Japan.
c.
United Kingdom.
d.
United States.
a
Easy
United States – Analytic – BB-Legal
Measuring the Economy
Efficient Resource Allocation and Pricing
73. The nation listed below whose economy currently comes closest to a free market is
a.
North Korea.
b.
Germany.
c.
People’s Republic of China.
d.
Cuba.
Easy
DISC: Markets, market failure, a – DISC: Markets, market failure, and externalities
United States – BPROG: Analytic
Markets, market failure, and ext – Markets, market failure, and externalities
Efficient Resource Allocation and Pricing
74. The necessity for choice, in economics, arises from
a.
high incomes and many goods.
b.
scarcity of economic means for satisfying economic wants.
c.
scarcity of time and knowledge, and numerous similar goods.
d.
All of the above are correct.
Moderate
DISC: Supply and demand
United States – BPROG: Analytic
Supply and demand
Efficient Resource Allocation and Pricing
75. The existence of a universal law of scarcity creates pressures on societies to
a.
use their resources according to government plans.
b.
economize in the use of their resources.