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Commerce and BusinessbackBusinessbackPrinciples of EconomicsbackEconomicsbackPractice Set 2495back

Economic Efficiency And Public Policy

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Question 1
Free
Multiple Choice

Productive efficiency for an individual firm requires that

Choose correct answer/s
A

all resources be fully used.

B

MC = P for all goods.

C

the firm be on its LRAC curve.

D

the firm be allocatively efficient.

E

P = ATC for all goods.

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Question 2
Free
Multiple Choice

For an entire economy,allocative efficiency requires that

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A

goods are allocated equitably across markets.

B

marginal cost equals price for all goods.

C

MRP is equated for all factors of production.

D

price equals average cost for all goods.

E

price is greater than marginal cost for all goods.

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Question 3
Free
Multiple Choice

Consider two firms,A and B,that are producing the same product but with different marginal costs.In this case,

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A

a reallocation of output between the firms can lower the industry's total cost.

B

neither firm is producing its output at the lowest attainable cost.

C

some resources must be unemployed.

D

each firm is being wasteful.

E

one firm is not maximizing profits.

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Question 4
Free
Multiple Choice

All points on a country's production possibilities boundary are

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A

allocatively efficient.

B

points at which P = MC for all goods.

C

productively efficient.

D

Pareto optimal.

E

not productively efficient.

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Question 5
Free
Multiple Choice

Consider two firms,A and B,that are producing the same product but with different average costs.Economists say this situation reflects a problem of

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A

unemployed resources.

B

economic inefficiency.

C

productive inefficiency.

D

allocative inefficiency.

E

Not necessarily any of the above.

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Question 6
Multiple Choice

If an economy is productively inefficient,it could improve its situation by

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A
moving along its production possibilities boundary.
B
moving beyond its production possibilities boundary.
C
moving onto its production possibilities boundary.
D
acquiring more resources.
E
trading some of its resources.
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Question 7
Multiple Choice

An economy will be allocatively efficient if

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A
the economy's resources are fully employed.
B
all firms are breaking even.
C
the average cost of production is the lowest possible for all goods produced.
D
price equals marginal cost for all products.
E
the price equals average cost for all goods.
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Question 8
Multiple Choice

An economy will be allocatively efficient if

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A
least-cost production techniques are employed by all firms.
B
the marginal costs of all firms in an industry are equal.
C
marginal cost equals price for all goods.
D
the economy's resources are fully employed.
E
imperfectly competitive markets are regulated.
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Question 9
Multiple Choice

If all firms are profit maximizers,then the following is assured:

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A
allocative efficiency.
B
each firm is productively efficient.
C
allocative and productive efficiency.
D
that the economy is operating inside the production possibilities boundary.
E
that firms attain the lowest possible average costs.
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Question 10
Multiple Choice

Allocative efficiency is actively sought

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A
by profit-maximizing firms in all market structures.
B
only by perfectly-competitive firms.
C
only by profit-maximizing imperfectly-competitive firms.
D
by none of the firms in any market.
E
by all firms in all markets.
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Question 11
Multiple Choice

Productive efficiency (at the level of the firm)is a goal that is sought

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A
by profit-maximizing firms in all market structures.
B
only by perfectly competitive firms.
C
only by profit-maximizing imperfectly competitive firms.
D
by no firms in any market.
E
only by profit-maximizing firms in an oligopolistic market structure.
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Question 12
Multiple Choice

Allocative efficiency is a property of the behaviour of

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A
individual firms.
B
all firms in an industry.
C
perfectly-competitive firms.
D
monopolies.
E
the overall economy.
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Question 13
Multiple Choice

Allocative efficiency concerns

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A
producing outputs at lowest possible cost.
B
the allocation of resources such that total economic surplus is maximized.
C
encouraging monopoly if it generates innovation.
D
discouraging all monopoly firms.
E
the equitable distribution of resources.
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Question 14
Multiple Choice

At the level of the industry,the condition for productive efficiency is that

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A
goods are allocated equitably.
B
there are no idle resources in the industry.
C
MC = P for all goods.
D
MRP = P for all inputs.
E
MC is equal for all firms in the industry.
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Question 15
Multiple Choice

We can safely say that each point on a country's production possibilities boundary (PPB)is

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A
allocatively efficient.
B
one at which P = MC for all goods.
C
productively efficient.
D
Pareto optimal.
E
not productively efficient.
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Question 16
Multiple Choice

Consider a monopolistically competitive industry in long-run equilibrium.Will this industry be productively efficient?

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A
Yes.Since the firms are in long-run equilibrium,they will all be producing at the minimum of their LRAC curves.
B
Yes.Since the firms are in long-run equilibrium,they will all be operating on their LRAC curves.
C
Yes.In long-run equilibrium,each firm is producing at an output level where price is equal to marginal cost.
D
No.Firms are selling their output at a level where price exceeds marginal cost and thus,by definition,cannot be productively efficient.
E
No.Since firms are selling differentiated products and there is no industry-wide price,we cannot conclude that marginal cost will be equated across all firms.
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Question 17
Multiple Choice

Consider an industry with three profit-maximizing firms producing identical soccer jerseys.At their current levels of output,Firm A has a MC of $22,Firm B has a MC of $26,and Firm C has a MC of $27.Each firm is minimizing its costs for its given level of output.Which of the following statements is definitely true?

Choose correct answer/s
A
Each firm and the industry are productively efficient.
B
Each firm is productively efficient but the industry is not.
C
The industry is productively efficient but each firm is not.
D
Each firm is allocatively efficient but the industry is not.
E
Each firm and the industry are allocatively efficient.
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Question 18
Multiple Choice

Consider three firms,A,B and C,all producing kilos of potatoes (per year)in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms. image FIGURE 12-1
-Refer to Figure 12-1.Suppose each of Firms A,B,and C are producing 500 kilos of potatoes.Is this industry productively efficient?

Choose correct answer/s
A
No,because the marginal cost curve for each firm has a different slope.
B
Yes,because output is equated for all firms.
C
No,because each firm could easily produce more than 500 kilos.
D
No,because marginal costs are not equated for all firms.
E
It is not possible to say whether this industry is productively efficient because we do not know the market price of the product.
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Question 19
Multiple Choice

Consider three firms,A,B and C,all producing kilos of potatoes (per year)in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms. image FIGURE 12-1
-Refer to Figure 12-1.Suppose each of Firms A,B,and C are producing 500 kilos of potatoes.Which of the following statements correctly describes the productive efficiency of this industry?

Choose correct answer/s
A
Productive efficiency would be achieved if Firm B produced all the output,since it has the lowest MC for the production of 500 kilos.
B
It is possible to reduce the total cost of the given output by reallocating production among the three firms.
C
The total output of 1500 kilos is the productively efficient output for this industry,so no reallocation is necessary.
D
It is not possible to say whether this industry is productively efficient because we do not know the market price of the product.
E
It is not possible to say whether this industry is productively efficient because we do not know the average costs for each firm.
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Question 20
Multiple Choice

Consider three firms,A,B and C,all producing kilos of potatoes (per year)in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms. image FIGURE 12-1
-Refer to Figure 12-1.Suppose each of Firms A,B and C are producing 500 kilos of potatoes.Keeping total output unchanged,what level of output should each firm be producing such that the industry is productively efficient?

Choose correct answer/s
A
Firm A: 200 kilos,Firm B: 500 kilos,Firm C: 800 kilos
B
Firm A: 700 kilos,Firm B: 800 kilos,Firm C: 0 kilos
C
Firm A: 500 kilos,Firm B: 800 kilos,Firm C: 200 kilos
D
Firm A: 500 kilos,Firm B: 500 kilos,Firm C: 500 kilos
E
Firm A: 500 kilos,Firm B: 200 kilos,Firm C: 200 kilos
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