Question 1

Figure 11-4 
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In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.

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The answer of Figure 11-4 
​ 
  
In Figure...

Question 2

Some years ago New York City imposed rent controls in an effort to provide housing at "fair" prices for as many people as possible. The result was a serious shortage of housing and deterioration of existing rental properties. How would an economist have described the result in terms of economic efficiency?

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Question 3

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

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Question 4

Differentiate between consumer's surplus and producer's surplus. For a rational consumer, consumer's surplus will never be a negative number. Why?

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Question 5

Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.

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Question 6

In many cities, the price of summer pops concerts has risen. In Charlotte, North Carolina, and Columbus, Ohio, for example, concerts that were once free now cost $5. If there are only fixed costs and no variable costs nor marginal costs in an orchestra concert, what is the efficient price? Explain the reason why some people will find the efficient price unfair.

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Question 7

The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.

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Question 8

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.

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Question 9

What is the rule for efficient output selection and how does the competitive market achieve it?

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Question 10

What makes production planning a daunting task for central planners?

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Question 11

Figure 11-5 
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Figure 11-5 contains a production possibilities frontier for wheat and milk production. Explain why Point C is not a point where resources are being used efficiently.

Accepted Answer

The answer of Figure 11-5 
​ 
  
Figure 11-5...

Question 12

Is an efficient market allocation fair? Explain.

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Question 13

Figure 11-3 
​ 
  
In Figure 11-3, if person 1 and person 2 have the indicated quantities of cheese and crackers and are on the indicated indifference curves, is there the possibility of mutually beneficial trade? Explain.

Accepted Answer

The answer of Figure 11-3 
​ 
  
In Figure...

Question 14

In an effort to prepare for war, the Defense Department is required by Congress to stockpile helium, once used to provide lift for blimps (phased out in the 1960s). About 100 years of total U.S. usage of helium is in storage. The Pentagon agrees to buy helium from producers at a price above what would otherwise prevail in the marketplace. Is this likely to result in efficiency? Explain.

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Question 15

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

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Question 16

Jupiter likes moons more than rings and gets marginal utility worth $5 from the last moon, and $2 from the last ring. Saturn prefers rings, getting MU = $3 from the last ring and $1 from moons. Describe a trade that would increase efficiency.

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Question 17

Milk costs $2 and the last unit provides $4 in marginal utility. Cheese costs $4 and the last unit provides $2 in marginal utility. Is this an efficient allocation of resources? If so, why? If not, why not?

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Question 18

How does the task of production planning happen in a laissez-faire economy?

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Question 19

How does a free-market system address the output selection task?

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Quiz 11: The Case for Free Markets: the Price System

Figure 11-4 In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

Differentiate between consumer's surplus and producer's surplus. For a rational consumer, consumer's surplus will never be a negative number. Why?

Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.

The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.

What is the rule for efficient output selection and how does the competitive market achieve it?

What makes production planning a daunting task for central planners?

Figure 11-5 Figure 11-5 contains a production possibilities frontier for wheat and milk production. Explain why Point C is not a point where resources are being used efficiently.

Is an efficient market allocation fair? Explain.

Figure 11-3 In Figure 11-3, if person 1 and person 2 have the indicated quantities of cheese and crackers and are on the indicated indifference curves, is there the possibility of mutually beneficial trade? Explain.

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

Jupiter likes moons more than rings and gets marginal utility worth $5 from the last moon, and $2 from the last ring. Saturn prefers rings, getting MU = $3 from the last ring and $1 from moons. Describe a trade that would increase efficiency.

Milk costs $2 and the last unit provides $4 in marginal utility. Cheese costs $4 and the last unit provides $2 in marginal utility. Is this an efficient allocation of resources? If so, why? If not, why not?

How does the task of production planning happen in a laissez-faire economy?

How does a free-market system address the output selection task?

Quiz 11: The Case for Free Markets: the Price System

Figure 11-4 ​ In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.

How does a laissez-faire economy decide which consumer gets each of the goods that has been produced?

Differentiate between consumer's surplus and producer's surplus. For a rational consumer, consumer's surplus will never be a negative number. Why?

Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.

The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.

Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient.

What is the rule for efficient output selection and how does the competitive market achieve it?

What makes production planning a daunting task for central planners?

Figure 11-5 ​ Figure 11-5 contains a production possibilities frontier for wheat and milk production. Explain why Point C is not a point where resources are being used efficiently.

Is an efficient market allocation fair? Explain.

Figure 11-3 ​ In Figure 11-3, if person 1 and person 2 have the indicated quantities of cheese and crackers and are on the indicated indifference curves, is there the possibility of mutually beneficial trade? Explain.

Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.

Jupiter likes moons more than rings and gets marginal utility worth $5 from the last moon, and $2 from the last ring. Saturn prefers rings, getting MU = $3 from the last ring and $1 from moons. Describe a trade that would increase efficiency.

Milk costs $2 and the last unit provides $4 in marginal utility. Cheese costs $4 and the last unit provides $2 in marginal utility. Is this an efficient allocation of resources? If so, why? If not, why not?

How does the task of production planning happen in a laissez-faire economy?

How does a free-market system address the output selection task?

Figure 11-4 In Figure 11-4, if the cheese industry and the cracker industry have the indicated quantities of capital and labor and are on the indicated production indifference curves, is there the possibility of mutually beneficial trade in inputs? Explain.

Figure 11-5 Figure 11-5 contains a production possibilities frontier for wheat and milk production. Explain why Point C is not a point where resources are being used efficiently.

Figure 11-3 In Figure 11-3, if person 1 and person 2 have the indicated quantities of cheese and crackers and are on the indicated indifference curves, is there the possibility of mutually beneficial trade? Explain.