QUIZ--CHAPTER FOURTEEN: Choose the best answer.
1. 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.
e. points representing combinations of x and y outside the curve (to the right) are possible at any moment in time simply by consuming more of everything.
2. Which type of economic system will produce the highest degree of allocative efficiency?
a. a purely 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.
e. a market system characterized by large dominant price-setting firms in most industries.
3. When prices of products are set below equilibrium,
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.
e. prices will tend to fall further due to the surpluses created.
4. Keeping landing fees low at airports during the “peak†hours
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.
e. relieves congestion during peak hours.
5. When a shortage occurs in the market for a good, quantity
a. demanded exceeds quantity supplied and the market mechanism pushes the price up, which in turn encourages more production and less consumption.
b. supplied exceeds quantity demanded and the price falls, which encourages more production and less consumption.
c. demanded exceeds quantity supplied and the market mechanism pushes the price down, which encourages more production and less consumption.
d. supplied exceeds quantity demanded and the price rises, which encourages more production and less consumption.
e. all of the above are correct.
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