### Efficiency: Sample Quiz

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 1. Another name for economic efficiency is: energy efficiency. productivity. Pareto optimality. social justice.

 2. A change increases economic efficiency if it increases: value. production. cost. price.

 3. Suppose that a set of resources exists that can produce either product X, which is worth \$20.00 to consumers or product Z, which is worth \$16.00. Under what conditions will it be economically efficient to have Z produced? When the government subsidizes product Z by \$3.00. When the government subsidizes product Z by \$5.00. When the government establishes price ceilings on X of \$18.00. It is never economically efficient to have Z produced.

Answer the next six questions using the tables that follow:

The entire economy of Eiland consists only of Able, Baker, and Carter. The only two goods they produce or consume are fish and bread. The following tables show how they can produce and their preferences for consuming.

 Producer: Production: Fish or Bread Able 2 1 Baker 2 1 Carter 2 1

 Willingness to pay for fish: **** Willingness to pay for bread: Quantity Price Quantity Price 1 \$6.51 1 \$10 2 \$6.01 2 \$8 3 \$5.51 3 \$6 4 \$5.01 4 \$4 5 \$4.51 6 \$4.01

 4. If one bread is being produced in this economy, how many fish are possible? 2. 3. 4. 6.

 5. In examining these demand curves, an economist would conclude that: both are consistent with the law of diminishing marginal utility. the demand for fish is consistent with the law of diminishing marginal utility but the demand for bread is not. the demand for bread is consistent with the law of diminishing marginal utility but the demand for fish is not. neither is consistent with the law of diminishing marginal utility.

 6. If only fish are being produced, what is the effect of producing one unit of bread? A gain of value of \$10.00 for bread and a loss of value of \$8.52 for fish A gain of value of \$10.00 for bread and a loss of value of \$12.52 for fish A gain of value of \$4.00 for bread and a loss of value of \$12.52 for fish A gain of value of \$4.00 for bread and a loss of value of \$8.52 for fish

 7. The value of three bread and three fish to this economy would be: \$34.03, but this combination is not possible. \$34.03, and this combination is possible. \$42.03, but this combination is not possible. \$42.03, and this combination is possible.

 8. This economy will find that the total combined value of bread and fish is at its largest when it produces: zero bread and six fish. one bread and four fish. two bread and two fish. three bread and six fish.

 9. If this economy ends up producing six fish and no bread, an economist would say that it is: economically efficient because it is on the production-possibilities frontier. Pareto optimal because all three people are fully employed. economically inefficient because value could be increased. Pareto suboptimal because the amount of bread is different from the amount of fish.