ECO 450 Week 3 Quiz – Strayer
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Quiz 2 Chapter 2 and 3
Chapter
2
Efficiency,
Markets,
and Government
and Government
True/False Questions
1. The normative
approach to public finance prescribes certain actions to achieve predetermined
criteria.
2. Positive
economic analysis is based on underlying value judgments.
3. “The
government should abolish tariffs to achieve efficiency” is a normative
statement.
4. It is possible
for efficiency not to be attained even if all production is carried on
without waste.
5. Efficiency is
attained when resources are used each year in such a way that no further net
gain is possible.
6. The efficient
annual output of any given good is attained if that good is made available in
amounts up to the point at which the total social benefit of the good equals
the total social cost.
7. If the
marginal social benefit of smoke detectors exceeds its marginal social cost,
then additional net gains are possible from an increased annual smoke detector
production.
8. Monopoly power
causes losses in efficiency because the marginal social benefit of output
exceeds its marginal social cost at the monopoly output.
9. Government
regulations that require airlines to serve routes for which the maximum price
that passengers are willing to pay for a trip fall short of the minimum price
that sellers are willing to accept are likely to cause losses in
efficiency.
10. Points lying
below a utility possibility curve are efficient.
11. Government
programs can achieve efficiency when the gains to gainers from those policies
exceed the losses to those who bear the costs.
12. If the
marginal social cost of beer production exceeds its marginal social benefit,
then more than the efficient about of beer is being produced.
13. Efficient
outcomes are often viewed as inequitable.
14. If it is not possible
to make someone better off without harming another, then resource allocation is
efficient.
15. Compensation
criteria are used to argue that changes in resource allocation should be made
if the gains to some groups outweigh the losses to others, even though
compensation for losses is not actually made.
16. All points on
a utility possibility curve are efficient but differ in terms of the
distribution of well-being.
17. A tax on a product shifts the demand curve.
18. A government subsidized price for a commodity that is
higher than the market driven price results in oversupply relative to the
efficient allocation.
19. When comparing the allocation of two goods relative to two
consumers with individual utility functions, multiple points of Pareto
efficiency can exist.
Multiple
Choice Questions
1. Positive
economics:
a. makes
recommendations designed to achieve certain goals.
b. establishes
cause-and-effect relationships between economic variables.
c. is
based on value judgments.
d. can
never be used to make predictions.
2. If the
efficient output of a good is produced each week, then the:
a. marginal
social benefit of the good equals its marginal social cost each week.
b. marginal
social benefit of the good is at a maximum.
c. total
social benefit of the good is at a maximum.
d. total
social benefit of the good equals its total social cost.
3. If the
marginal social benefit of a good exceeds the marginal social cost at the
current monthly output, then:
a. it
will be possible to make buyers of the good better off without harming sellers
of the good.
b. it
will be possible to make sellers of the good better off without harming buyers
of the good.
c. either
(a) or (b)
d. a
reduction in monthly output will be required for efficiency.
4. The marginal
social cost of bread exceeds the marginal social benefit at the current weekly
output. Therefore,
a. the
marginal net benefit of bread is positive.
b. the
output of bread is efficient.
c. a
reduction in weekly output of bread is necessary to achieve efficiency.
d. an
increase in weekly output of bread is necessary to achieve efficiency.
5. The total
social benefit of automobiles equals the total social cost at current annual
output. Then it follows that:
a. the
annual output of automobiles is efficient.
b. the
annual output of automobiles exceeds the efficient amount.
c. less
than the efficient annual output of automobiles is produced.
d. it
is not possible to make buyers of automobiles better off without harming
sellers.
e. both
(a) and (d)
6. Eggs are sold in a perfectly competitive market. No
persons other than the buyers and sellers of eggs are affected in any way when
eggs are traded in the market. Then it follows that:
a. the
price of eggs equals the marginal social cost of eggs.
b. the
price of eggs equals the marginal social benefit of eggs.
c. the
price of eggs exceeds the marginal social benefit of eggs.
d. both
(a) and (b)
7. Diamonds are
sold by a monopoly firm that maximizes profits. Then it follows that:
a. the
marginal social benefit of diamonds exceeds its marginal social cost.
b. the
marginal social cost of diamonds exceeds its marginal social benefit.
c. the
price of diamonds equals its marginal social cost.
d. the
price of diamonds exceeds its marginal social benefit.
e. both
(c) and (d)
8. Points on a
utility possibility curve represent:
a. a
given distribution of well-being between two persons.
b. an
efficient allocation of resources.
c. the
maximum well-being of any one person, given the resources available and the
well-being of another person.
d. all
of the above
9. If efficiency
has been attained,
a. it
will be possible to make any one person better off without harming another.
b. it
will not be possible to make any one person better off without harming another.
c. perfect
competition must exist.
d. the
opportunity cost of any change in resource use must be zero.
10. A move from an
inefficient resource allocation to an efficient one:
a. will
always be unanimously approved, even if gainers do not compensate losers.
b. will
be unanimously opposed.
c. will
be unanimously approved if gainers compensate losers.
d. can
never result in losers.
11. Which of the
following is a normative statement?
a. When
interest rates rise, the quantity of loanable funds demanded for new mortgages
will decline.
b. To
achieve efficiency, governments should prevent monopoly in markets.
c. Unemployment
increases during a recession.
d. When
governments increase income tax rates, people work less.
12. Normative
economics:
a. is
not based on underlying value judgments.
b. makes
recommendations to achieve efficient outcomes.
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