Economics, 11e, Global Edition (Parkin)
Chapter 5 Efficiency and Equity
1 Resource Allocation Methods
1) In the United States, resources are most often allocated by
A) market price.
B) command system.
C) lottery.
D) contest.
Answer: A
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
2) A contest is a good way to allocate scarce resources when
A) the efforts of the players are hard to monitor directly.
B) the lines of responsibility are clear.
C) the decision being made affects a large number of people.
D) there is no effective way to distinguish among potential users.
Answer: A
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
3) The resource allocation method that is used to allocate scarce resources between private use and government use is
A) first-come, first-served.
B) personal characteristics.
C) majority rule.
D) lottery.
Answer: C
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
4) Which of the following is true?
A) Lotteries work best when a resource can serve just one user at a time in a sequence.
B) A market price always allocates resources better than a command system.
C) In the United States, how tax dollars are allocated among competing uses is an example of how resources are allocated by majority rule.
D) Force has never played an important role in allocating scarce resources.
Answer: C
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Revised
AACSB: Analytical Skills
5) Which of the following is true?
A) When resources are allocated on the basis of personal characteristics, all people who are willing and able to pay the price get the resource.
B) When the range of activities to be monitored is large and complex, a command system allocates resources better than a market price.
C) When a market price allocates resources, some people who are willing and able to pay that price don't get the resource.
D) Force helps support the legal system on which markets function.
Answer: D
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
6) As a method of resource allocation, force
A) is not important.
B) plays a crucial negative role.
C) plays a crucial positive role.
D) plays a crucial role for both good and ill.
Answer: D
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
7) As a method of resource allocation, market price
A) means those who are willing and able to pay get a particular good or service.
B) works well when self-interest must be suppressed.
C) works best inside firms and government departments.
D) is efficient when there is no effective way to distinguish among potential users of a scarce resource.
Answer: A
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
8) Which of the following is true?
A) When a market price allocates resources, all people who are willing and able to pay that price get the resource.
B) A command system works well when the range of activities to be monitored is large and complex.
C) When the government decides how to allocate tax dollars among competing uses, resources are allocated by market prices.
D) When a manager offers everyone in the company the opportunity to win a prize, resources are allocated by a lottery.
Answer: A
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
9) When allocating resources using market price,
A) everyone who is willing and able to pay for a good gets one.
B) everyone who wants a good gets one.
C) everyone who is willing to pay for a good gets one.
D) everyone who is able to pay for a good gets one.
Answer: A
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
10) When scarce resources can serve only one user at a time in sequence, which method works well for allocating the scarce resources?
A) first come, first served
B) lottery
C) contest
D) command system
Answer: A
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
11) Currently kidneys are allocated based on the needs of each perspective recipient, their blood type, and the urgency of their case. An alternative way to allocate kidneys is to go by the order in which patients were placed on the waiting list. In that case, the allocation of resources is made using
A) market price.
B) auction.
C) first-come, first-served.
D) personal characteristics.
Answer: C
Topic: Resource Allocation Methods
Skill: Conceptual
Status: New
AACSB: Reflective Thinking
12) The night before enrollment was to open for the University of Johannesburg a line of people more than a mile long formed outside the gates. When the gates opened, a stampede started, and a woman lost her life in her attempt to secure her son a spot at the university and a chance for a better life. (Source: New York Times, January 10, 2012)
Based on the news clip above, the allocation of resources in made using
A) market price.
B) auction.
C) first-come, first-served.
D) lottery.
Answer: C
Topic: Resource Allocation Methods
Skill: Conceptual
Status: New
AACSB: Reflective Thinking
13) Which of the following is true?
A) When a market price allocates resources, everyone who is able to pay the price gets the resource.
B) A command system works well when the lines of authority and responsibility are clear.
C) When the government decides how to allocate tax dollars among competing uses, resources are allocated by command.
D) When a manager offers everyone in the company the opportunity to win a prize, resources are allocated by a market price.
Answer: B
Topic: Resource Allocation Methods
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
14) Alvin Roth of Harvard won the 2012 Nobel Prize in Economics for designing systems that allocate resources in innovative ways. For example, he designed a system that matches donated kidneys to recipients waiting for such donations. This system takes into account the needs of each perspective recipient, their blood type, and the urgency of their case. (Source: Washington Post, October 16, 2012)
Based on the news clip above, the allocation of resources is made using
A) market price.
B) auction.
C) lottery.
D) personal characteristics.
Answer: D
Topic: Resource Allocation Methods
Skill: Conceptual
Status: New
AACSB: Reflective Thinking
15) Asian women lag far behind the West in their representation in management level positions. A recent report by the consulting company McKinsey suggests that there is an opportunity for companies to recruit under-utilized female talent and do well financially as a result. (Source: The Economist, July 7, 2012)
The fact that Asian women are currently less likely to be hired as managers is a result of the allocation system using which of the following methods for hiring?
A) Lottery
B) Auction
C) First-Come, First-Served
D) Personal Characteristics
Answer: D
Topic: Resource Allocation Methods
Skill: Conceptual
Status: New
AACSB: Reflective Thinking
16) Allocating resources by the order of someone in authority is a ______allocation method.
A) first-come, first-served
B) market price
C) majority rule
D) command
Answer: D
Topic: Study Guide Question, Resource Allocation Method
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
17) Often people trying to withdraw money from their bank must wait in line, which reflects a ______allocation method.
A) first-come, first-served
B) market price
C) contest
D) command
Answer: A
Topic: Study Guide Question, Resource Allocation Method
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
18) If a person will rent an apartment only to married couples over 30 years old, that person is allocating resources using a ______allocation method.
A) first-come, first-served
B) market price
C) personal characteristics
D) command
Answer: C
Topic: Study Guide Question, Resource Allocation Method
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
2 Benefit, Cost, and Surplus
1) The value of one more unit of a good or service is the
A) marginal benefit.
B) minimum price that people are willing to pay for another unit of the good or service.
C) marginal cost.
D) opportunity cost of producing one more unit of a good or service.
Answer: A
Topic: Value, Willingness to Pay, and Demand
Skill: Definition
Status: Old
AACSB: Analytical Skills
2) The value of a good is equal to the
A) maximum price you are willing to pay for it.
B) price that you actually pay for it.
C) price you actually pay for it minus the maximum you are willing to pay for it.
D) maximum you are willing to pay for it minus the price you actually pay for it.
Answer: A
Topic: Value, Willingness to Pay, and Demand
Skill: Definition
Status: Old
AACSB: Analytical Skills
3) Marginal benefit is the benefit received from ______.
A) consuming more goods or services
B) producing the efficient quantity
C) consuming the efficient quantity
D) consuming one more unit of a good or service
Answer: D
Topic: Marginal Benefit
Skill: Definition
Status: Old
AACSB: Analytical Skills
4) All of the following statements about marginal benefit are correct EXCEPT the marginal benefit of a good
A) is the benefit a person receives from consuming one more unit of the good or service.
B) is measured as the maximum amount that a person is willing to pay for one more unit of the good.
C) is equal to zero when resource use is efficient.
D) decreases as the quantity consumed of the good increases.
Answer: C
Topic: Marginal Benefit
Skill: Definition
Status: Old
AACSB: Analytical Skills
5) Sal likes to eat pizza. The ______is the maximum amount that Sal is willing to pay for one more piece of pizza.
A) efficient price
B) efficient amount
C) marginal benefit
D) marginal cost
Answer: C
Topic: Marginal Benefit
Skill: Definition
Status: Old
AACSB: Analytical Skills
6) Marginal benefit
A) is the same as the total benefit received from consuming a good.
B) is the maximum amount a person is willing to pay for one more unit of a good.
C) increases as consumption increases.
D) is the difference between total benefit and total cost.
Answer: B
Topic: Marginal Benefit
Skill: Definition
Status: Old
AACSB: Analytical Skills
7) Jane is willing to pay $50 for a pair of shoes. The actual price of the shoes is $30. Her marginal benefit is
A) $50.
B) $30.
C) $20.
D) $80.
Answer: A
Topic: Marginal Benefit
Skill: Analytical
Status: Old
AACSB: Analytical Skills
The table below shows the demand schedules for pizza for Abby and Barry who are the only buyers in the market.
(dollars per slice) / Abby's quantity demanded
(slices per month) / Barry's quantity demanded
(slices per month)
2.50 / 25 / 50
3.00 / 20 / 40
3.50 / 15 / 30
4.00 / 10 / 20
4.50 / 5 / 10
5.00 / 0 / 0
8) Based on the table, what is Abby's marginal benefit from the 10th slice of pizza?
A) $4
B) $13
C) $0.50
D) $40
Answer: A
Topic: Marginal Benefit
Skill: Analytical
Status: Old
AACSB: Analytical Skills
9) Based on the table, what is Barry's marginal benefit from the 40th slice of pizza?
A) $3
B) $5.50
C) $0.50
D) $12
Answer: A
Topic: Marginal Benefit
Skill: Analytical
Status: Old
AACSB: Analytical Skills
10) Based on the table, what is the marginal social benefit from the 45th slice of pizza?
A) $3.50
B) $3.25
C) $0.50
D) $9
Answer: A
Topic: Marginal Social Benefit
Skill: Analytical
Status: Old
AACSB: Analytical Skills
11) If you increase your consumption of soda by one additional can a week, your marginal benefit of this last can is $1.00. The ______of this last can of soda is $1.00.
A) value
B) price
C) opportunity cost
D) marginal cost
Answer: A
Topic: Value, Willingness to Pay, and Demand
Skill: Analytical
Status: Old
AACSB: Analytical Skills
12) A person will choose to buy a good as long as
A) marginal benefit is at least as great as price.
B) consumer surplus is positive.
C) marginal benefit is positive.
D) consumer surplus is at least as great as price.
Answer: A
Topic: Value, Willingness to Pay, and Demand
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
13) Sam's demand curve for pizza
A) lies above her marginal benefit curve for pizza.
B) lies below her marginal benefit curve for pizza.
C) is the same as her marginal benefit curve for pizza.
D) has one point in common with her marginal benefit curve for pizza.
Answer: C
Topic: Value, Willingness to Pay, and Demand
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
14) The market demand curve
A) can also be the marginal social cost curve.
B) shows the value of a good that consumers must give up to get another unit of a different good.
C) by itself determines equilibrium prices.
D) can also be the marginal social benefit curve.
Answer: D
Topic: Marginal Benefit and Demand
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
15) The market demand curve also is
A) a marginal social cost curve.
B) a marginal social benefit curve.
C) an opportunity cost curve.
D) a consumer surplus curve.
Answer: B
Topic: Marginal Benefit and Demand
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
16) The market demand curve for coffee is the same as the
A) marginal social cost curve of coffee.
B) marginal social benefit curve of coffee.
C) opportunity cost curve of coffee.
D) marginal social benefit curve minus the marginal social cost curve of coffee.
Answer: B
Topic: Marginal Benefit and Demand
Skill: Conceptual
Status: Old
AACSB: Analytical Skills
17) A market demand curve measures
A) how much a consumer is willing to pay for an additional unit of the good.
B) the marginal social benefit of an additional unit of the good.
C) the marginal social cost of an additional unit of the good.
D) Both answers A and B are correct.
Answer: D
Topic: Value, Willingness to Pay, and Demand
Skill: Conceptual
Status: Old