CLEP Microeconomics chapter practice4 questions

05 Economic Systems, Property Rights, and Incentives

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

In a market system, a sustained increase in the price of avocados most directly signals producers that

A higher price communicates greater relative scarcity: willingness to pay has risen compared with supply. Producers then have an incentive to expand output.
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E. additional avocado output has become more valuable

A higher price communicates greater relative scarcity: willingness to pay has risen compared with supply. Producers then have an incentive to expand output.

Question 2

Question 2 of 4

Which arrangement gives a homeowner the strongest private incentive to pay for insulation, other things equal?

The owner captures future savings and expects to retain control long enough to receive them. The other arrangements separate the investment cost from its benefit.
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C. The homeowner expects to keep the home and receives the resulting energy-cost savings.

The owner captures future savings and expects to retain control long enough to receive them. The other arrangements separate the investment cost from its benefit.

Question 3

Question 3 of 4

A reliable certification service lowers the cost buyers incur to verify used-car quality. Its most direct economic effect is to

Certification can reduce information and verification costs, allowing trades whose gains would otherwise be smaller than the cost of arranging exchange.
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A. reduce a transaction cost that may otherwise block beneficial trades

Certification can reduce information and verification costs, allowing trades whose gains would otherwise be smaller than the cost of arranging exchange.

Question 4

Question 4 of 4

An analyst evaluates a refundable bottle-deposit law. Which statement in the report is empirically testable?

The statement reports a measurable effect of a policy. The other choices depend on judgments about what government or society ought to prefer.
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B. A refundable deposit increased the return rate for beverage containers.

The statement reports a measurable effect of a policy. The other choices depend on judgments about what government or society ought to prefer.

Quiz complete