Question 1: In a planned economy,

1. High prices discourage use of the most scarce resources.
2. Prices are used to coordinate economic activity
3. Central planners allow the price to determine distribution of a product.
4. Central planner set production targets and tell producers how to produce.

Question 2: Government-imposed limits on price movements are likely to

1. Promote economic growth in the economy
2. Leave economic efficiency uncharged
3. Increase economic efficiently
4. Decrease economic efficiency

Question 3: "Fair" outcomes and "efficient" outcomes are always identical.

1. True
2. False

Question 4: Marxists and leaders of communist economies actually often admire the market mechanism for its

1. Maximization of net benefits for consumers
2. Fairness in distribution of output
3. Efficiency in allocation of resources
4. Effectiveness in achieving high rates of growth

Question 5: The laissez-faire free market system is

1. One that leaves no room for improvement
2. Unmatched by any other system for allocative efficiency
3. An ideal of perfection
4. All the responses are correct

Question 6: Prohibition price increases in situations of true scarcity

1. All of the answers are correct
2. Prevents the market mechanism from reallocating resources more efficiently
3. May lead to extreme shortages of vitally needed products
4. Discourages production

Question 7: The basic forces driving the "invisible hand" are

1. Cooperation and altruism
2. Competition and self-interest
3. Information and computer technology
4. Government and business

Question 8: In a competitive market economy, a resources in short supply will be allocated

1. To those firms that can make the most profitable use of it
2. By government fiat
3. According to how much each firm purchased before the shortage
4. So that each firm gets enough to keep producing some portion its output

Question 9: The price system is sometimes criticized in that it

1. Relies too heavily on input output analysis
2. Leads to greater efficiency
3. Coordinates activities without the need for planning by government agencies
4. Results in allowing the rich get a disproportionate say in what goods and services are produced.

Question 10: If a technology breakthrough reduces input quantities needed to produce some item.

1. Quantity demanded of the product will fall
2. The price of the product will rise
3. The price of the product will fall
4. Cost of production will be increased

Question 11: An efficient allocation of resources exists if

1. The economy is operating at any point above the production possibilities frontier
2. The economy operates at any point under the production possibilities frontier
3. One group of people can get more of the things they what without someone else having to give up anything
4. No one can get more of the things he or she wants without someone else having to give up something

Question 12: Division of iron are between the production of bridge girders and tanker drums is an example of

1. Both output selection and distribution
2. Input-output analysis
3. Production planning
4. A distribution problem

Question 13: It is that the distribution process carried out by the price system

1. Favors the rich
2. Is superior to other rationing mechanisms because it is able to pay attention to individual consumer preferences
3. Accomplishes the task more efficiently than central planners would
4. All of these responses are true

Question 14: In a free market system, producers will react to an increase in demand when

1. The free press publishes news of the increased demand
2. Their costs increase
3. The government announces the increased demand
4. The Price goes up

Question 15: Laissez-faire refers to a situation in which there is _______with the workings of the market system

1. Complete government interference
2. Minimal government interference
3. Zero government interference
4. Zero consumer involvement