A.  In a competitive equilibrium, marginal benefit equals marginal cost and resource allocation is efficient.
B.  The market provides more than the efficient quantity of goods and services that have external costs and less than the efficient quantity of goods and services that have external benefits.
C.  The market provides less than the efficient quantity of public goods because of the free-rider problem.
D.  A monopoly produces less than the efficient quantity.
E.  Price ceilings and price floors decrease the quantity produced to less than the efficient quantity.
F.  Taxes and quotas decrease the quantity produced to less than the efficient quantity, and subsidies increase the quantity produced to more than the efficient quantity.
G.  Both underproduction and overproduction create a deadweight loss.

There is no reason to believe that any of the alternative mechanisms for allocating resources lead to efficiency.

 6.4   Explain the efficiency of the alternative methods of allocating resources.

 6.5  Explain the main ideas about fairness of competitive markets and other allocation methods.

 6.4   Explain the efficiency of the alternative methods of allocating resources.

A.  In a competitive equilibrium, marginal benefit equals marginal cost and resource allocation is efficient.
B.  The market provides more than the efficient quantity of goods and services that have external costs and less than the efficient quantity of goods and services that have external benefits.
C.  The market provides less than the efficient quantity of public goods because of the free-rider problem.
D.  A monopoly produces less than the efficient quantity.
E.  Price ceilings and price floors decrease the quantity produced to less than the efficient quantity.
F.  Taxes and quotas decrease the quantity produced to less than the efficient quantity, and subsidies increase the quantity produced to more than the efficient quantity.
G.  Both underproduction and overproduction create a deadweight loss.

There is no reason to believe that any of the alternative mechanisms for allocating resources lead to efficiency.

 6.5  Explain the main ideas about fairness of competitive markets and other allocation methods.

A.  Ideas about fairness divide into two groups: fair results and fair rules.
B.  Fair-results ideas require income transfers from the rich to the poor.
C.  Fair-rules ideas require property rights and voluntary exchange.

Take the optional post-study bonus point quizzes on Efficiency and Fairness of Markets Saturday following Module 2.

Take the optional pre-study bonus point quizzes on Taxes on Sunday preceding Module 3.

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In a new Cato Policy Analysis, economist Richard A. Ippolito argues that without changes, underfunding of private-sector pension plans could lead to a massive taxpayer bailout. To avert an impending crisis, he recommends transforming the Pension Benefit Guaranty Corporation into a private insurance program.