Test Bank For Macroeconomics 15th Canadian Edition By Christopher T.S. Ragan

Test Bank For Macroeconomics 15th Canadian Edition By Christopher T.S. Ragan

Chapter 12 Economic Efficiency and Public Policy

12.1 Productive and Allocative Efficiency

1) Productive efficiency for an individual firm requires that

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.

Answer: C

Diff: 1

Topic: 12.1a. productive and allocative efficiency

Skill: Recall

Learning Obj.: 12-1 Distinguish between productive efficiency and allocative efficiency.

User2: Qualitative

2) For an entire economy, allocative efficiency requires that

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.

Answer: B

Diff: 1

Topic: 12.1a. productive and allocative efficiency

Skill: Recall

Learning Obj.: 12-1 Distinguish between productive efficiency and allocative efficiency.

User2: Qualitative

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

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.

Answer: A

Diff: 1

Topic: 12.1a. productive and allocative efficiency

Skill: Applied

Learning Obj.: 12-1 Distinguish between productive efficiency and allocative efficiency.

User2: Qualitative

4) If the total output of some industry is allocated among its individual firms in such a way that the total cost of producing the industry’s output is minimized, we know the industry has achieved

1) full employment of resources;

2) productive efficiency;

3) allocative efficiency.

A) 1 only

B) 2 only

C) 3 only

D) both 1 and 3

E) both 2 and 3

Answer: B

Diff: 2

Topic: 12.1a. productive and allocative efficiency

Skill: Recall

Learning Obj.: 12-1 Distinguish between productive efficiency and allocative efficiency.

User2: Qualitative

5) All points on a country’s production possibilities boundary are

A) allocatively efficient.

B) points at which P = MC for all goods.

C) productively efficient.

D) Pareto optimal.

E) not productively efficient.

Answer: C

Diff: 1

Topic: 12.1a. productive and allocative efficiency

Skill: Recall

Learning Obj.: 12-1 Distinguish between productive efficiency and allocative efficiency.

User2: Qualitative