Question 1

How is information conveyed from one individual participant to another in a market system?

Accepted Answer

Information is passe...

Question 2

Why is informational efficiency difficult to achieve in a centrally planned economy?

Accepted Answer

All information must accurately flow to ...

Question 3

When great precision in the coordination of individual productive activities is required,

Accepted Answer

A)  such activity must be organized by the government.
B)  economic activity comes to a stop.
C)  the price (or market)  system must be completely scrapped.
D)  monarchy is necessary.
E)  organizations such as firms are formed.F) A) and D)
G) D) and E)

Question 4

At an equilibrium price,

Accepted Answer

A)  both producers and consumers are satisfied with the quantity traded.
B)  only consumers are satisfied with the amount they can buy.
C)  only producers are satisfied with the amount traded.
D)  neither consumers nor producers are satisfied with the quantity traded.
E)  the willingness to sell and the willingness to buy are left out of balance.F) D) and E)
G) A) and B)

Question 5

A price ceiling results in deadweight loss.

Accepted Answer

A) True 
 B)False

Question 6

Other things being equal, a tax on producers results in deadweight loss.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 7-1 
-Refer to Exhibit 7-1. Total output in the market is 6 units. To achieve efficiency, Firm B should produce

Accepted Answer

A)  1 unit.
B)  3 units.
C)  4 units.
D)  5 units.
E)  6 units.F) B) and E)
G) A) and C)

Question 8

Pareto efficiency occurs when there is no difference in the levels of income among individuals.

Accepted Answer

A) True 
 B)False

Question 9

Deadweight loss occurs in

Accepted Answer

A)  a price floor but not a price ceiling.
B)  a price ceiling but not a price floor.
C)  both a price floor and a price ceiling.
D)  neither a price floor nor a price ceiling.
E)  market equilibrium.F) All of the above
G) B) and E)

Question 10

Which of the following statements is true?

Accepted Answer

A)  A tax assessed on producers shifts up supply.
B)  A specific tax assessed on producers does not affect consumers.
C)  A tax assessed on producers shifts down supply.
D)  An ad valorem tax assessed on producers does not affect consumers
E)  A tax assessed on producers shifts both the supply and demand curves.F) A) and E)
G) A) and D)

Question 11

The price system has its largest informational advantage

Accepted Answer

A)  any time exchange must take place and different individuals have comparative advantages.
B)  when parties to exchanges are spread out and very close coordination is not necessary.
C)  in government bureaucracy.
D)  in large business enterprises where production is in many locations.
E)  in small business enterprises where all production is one location.F) C) and D)
G) B) and C)

Question 12

A price floor results in a decrease in deadweight loss.

Accepted Answer

A) True 
 B)False

Question 13

The only way price and quantity will not change when a tax is assessed on producers is for

Accepted Answer

A)  demand to be perfectly inelastic.
B)  supply to be perfectly elastic and demand to be perfectly inelastic.
C)  supply to be perfectly elastic.
D)  supply to be perfectly inelastic.
E)  demand to be perfectly elastic.F) A) and B)
G) A) and E)

Question 14

Without market coordination,

Accepted Answer

A)  violent force is necessary to motivate individuals.
B)  a society disintegrates.
C)  the problem of scarcity can be controlled.
D)  central direction is necessary.
E)  an orderly society can at last be a possibility.F) A) and B)
G) A) and C)

Question 15

Exhibit 7-13 
-Refer to Exhibit 7-13. There is no deadweight loss as a result of a tax of $10 per unit on producers if

Accepted Answer

A)  a minimum price of $50 is established by the government.
B)  the government requires production of 700 units.
C)  a consumer-paid tax of $10 is imposed by the government.
D)  the government regulates production to 300 units.
E)  the government restricts the quantity consumers can buy to 400 units.F) A) and D)
G) B) and D)

Question 16

Deadweight loss

Accepted Answer

A)  is a problem only when more than the equilibrium quantity is produced.
B)  is a loss of producer and consumer surplus.
C)  is a problem only when less than the equilibrium quantity is produced.
D)  occurs when Pareto efficiency is achieved.
E)  is typically an example of market failure.F) A) and E)
G) A) and B)

Question 17

Income equality is achieved when society achieves efficiency.

Accepted Answer

A) True 
 B)False

Question 18

The first theorem of welfare economics concerns the efficiency of competitive markets.

Accepted Answer

A) True 
 B)False

Question 19

Define Pareto efficiency.

Accepted Answer

Pareto efficiency is achieved ...

Question 20

Other things being equal, the more elastic supply is, the larger is the increase in price as a result of a tax on producers.

Accepted Answer

A) True 
 B)False

Exam 7: The Efficiency of Markets

Pareto efficiency occurs when there is no difference in the levels of income among individuals.

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Why is informational efficiency difficult to achieve in a centrally planned economy?

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The first theorem of welfare economics concerns the efficiency of competitive markets.

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Income equality is achieved when society achieves efficiency.

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The price system has its largest informational advantage

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Without market coordination,

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A price ceiling results in deadweight loss.

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Define Pareto efficiency.

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Which of the following statements is true?

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Deadweight loss

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Other things being equal, a tax on producers results in deadweight loss.

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A price floor results in a decrease in deadweight loss.

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At an equilibrium price,

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Exhibit 7-1 -Refer to Exhibit 7-1. Total output in the market is 6 units. To achieve efficiency, Firm B should produce

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Other things being equal, the more elastic supply is, the larger is the increase in price as a result of a tax on producers.

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How is information conveyed from one individual participant to another in a market system?

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Deadweight loss occurs in

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Exhibit 7-13 -Refer to Exhibit 7-13. There is no deadweight loss as a result of a tax of $10 per unit on producers if

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The only way price and quantity will not change when a tax is assessed on producers is for

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When great precision in the coordination of individual productive activities is required,

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All information must accurately flow to ...
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Pareto efficiency is achieved ...
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Information is passe...
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