Question 1

The most important consequence of property rights is that

Accepted Answer

A) they facilitate exchange. 
B) allow for freedom of choice. 
C) they encourage people to cooperate by helping to ensure that only mutually agreeable economic transactions take place. 
D) they allow for a division of labour. 
A) they facilitate exchange. 
B) allow for freedom of choice. 
C) they encourage people to cooperate by helping to ensure that only mutually agreeable economic transactions take place. 
D) they allow for a division of labour.

Question 2

Property rights are important because they:

Accepted Answer

A) encourage investment and growth. 
B) are conducive to the writing of books and music. 
C) facilitate exchange. 
D) do all of the above. 
A) encourage investment and growth. 
B) are conducive to the writing of books and music. 
C) facilitate exchange. 
D) do all of the above.

Question 3

Households and businesses are both suppliers in the product market.

Accepted Answer

A) True 
 B)False

Question 4

Which would not be characteristic of a capitalist economy?

Accepted Answer

A) government ownership of the means of production 
B) competition and unrestricted markets 
C) reliance on the market system 
D) free enterprise and choice 
A) government ownership of the means of production 
B) competition and unrestricted markets 
C) reliance on the market system 
D) free enterprise and choice

Question 5

Specialization in production is economically beneficial primarily because it:

Accepted Answer

A) allows everyone to have a job which they like. 
B) permits the production of a larger output with fixed amounts of resources. 
C) facilitates trade by bartering. 
D) guarantees full employment. 
A) allows everyone to have a job which they like. 
B) permits the production of a larger output with fixed amounts of resources. 
C) facilitates trade by bartering. 
D) guarantees full employment.

Question 6

The "invisible hand" refers to the many indirect controls which the federal government imposes in a system of mixed capitalism.

Accepted Answer

A) True 
 B)False

Question 7

On the basis of the information provided and assuming trade occurs between the three provinces we can expect:

Accepted Answer

A) Alberta to exchange apples with Ontario and receive money in return. 
B) Alberta to exchange apples with British Columbia and receive money in return. 
C) Ontario to exchange lettuce with British Columbia and receive autos in return. 
D) none of the above to occur. 
A) Alberta to exchange apples with Ontario and receive money in return. 
B) Alberta to exchange apples with British Columbia and receive money in return. 
C) Ontario to exchange lettuce with British Columbia and receive autos in return. 
D) none of the above to occur.

Question 8

Refer to the circular flow model of the economy.In the diagram flow (2) represents:

Accepted Answer

A) wage, rent, interest, and profit income. 
B) land, labour, capital, and entrepreneurial ability. 
C) goods and services. 
D) consumer expenditures. 
A) wage, rent, interest, and profit income. 
B) land, labour, capital, and entrepreneurial ability. 
C) goods and services. 
D) consumer expenditures.

Question 9

The process in which workers select specialized tasks to make a product is referred to as:

Accepted Answer

A) a coincidence of wants. 
B) roundabout production. 
C) freedom of choice. 
D) division of labour. 
A) a coincidence of wants. 
B) roundabout production. 
C) freedom of choice. 
D) division of labour.

Question 10

The two basic markets shown by the simple circular flow model are:

Accepted Answer

A) capital goods and consumer goods. 
B) free and controlled. 
C) product and factor. 
D) household and business. 
A) capital goods and consumer goods. 
B) free and controlled. 
C) product and factor. 
D) household and business.

Question 11

_____ helps avoid the problems posed by the lack of double coincidence of wants.

Accepted Answer

A) Barter 
B) Trade 
C) Money 
D) Freedom of choice 
A) Barter 
B) Trade 
C) Money 
D) Freedom of choice

Question 12

The term "mixed economy" refers to an economy:

Accepted Answer

A) comprised of both product and resource markets. 
B) which engages in both domestic and international trade. 
C) comprised of both extensive private markets and government involvement in the economy. 
D) which functions primarily on the basis of custom and tradition. 
A) comprised of both product and resource markets. 
B) which engages in both domestic and international trade. 
C) comprised of both extensive private markets and government involvement in the economy. 
D) which functions primarily on the basis of custom and tradition.

Question 13

The most efficient combination of resources in producing any output is that combination which:

Accepted Answer

A) comes closest to using the same quantities of land, labour, capital, and entrepreneurial ability. 
B) can be obtained for the smallest money outlay. 
C) uses the smallest total quantity of all resources. 
D) conserves most on the use of labour. 
A) comes closest to using the same quantities of land, labour, capital, and entrepreneurial ability. 
B) can be obtained for the smallest money outlay. 
C) uses the smallest total quantity of all resources. 
D) conserves most on the use of labour.

Question 14

Which of the following is not a part of a market system?

Accepted Answer

A) private property 
B) freedom of enterprise and choice 
C) competition in product and resource markets 
D) government determination of basic economic goals 
A) private property 
B) freedom of enterprise and choice 
C) competition in product and resource markets 
D) government determination of basic economic goals

Question 15

What to produce in a market economy is ultimately determined by the:

Accepted Answer

A) output decisions of business firms. 
B) government. 
C) spending decisions of households. 
D) workers' technical skills. 
A) output decisions of business firms. 
B) government. 
C) spending decisions of households. 
D) workers' technical skills.

Question 16

Freedom of choice enables:

Accepted Answer

A) entrepreneurs to procure and use resources that are required to produce goods and services at their own will. 
B) owners of property to employ and dispose of their properties as they see fit. 
C) consumers to maximize their utility by paying the minimum price for goods and services. 
D) entrepreneurs to set up any form of business entity as per law. 
A) entrepreneurs to procure and use resources that are required to produce goods and services at their own will. 
B) owners of property to employ and dispose of their properties as they see fit. 
C) consumers to maximize their utility by paying the minimum price for goods and services. 
D) entrepreneurs to set up any form of business entity as per law.

Question 17

The development of the Internet and e-mail to replace regular mail services in many cases would be an example of:

Accepted Answer

A) roundabout production. 
B) derived demand. 
C) creative destruction. 
D) specialization. 
A) roundabout production. 
B) derived demand. 
C) creative destruction. 
D) specialization.

Question 18

The market system communicates changes in supply and demand and elicits appropriate responses from businesses and resource suppliers.This is known as the:

Accepted Answer

A) rationing function of prices. 
B) guiding function of prices. 
C) monetary function of prices. 
D) circular flow of income. 
A) rationing function of prices. 
B) guiding function of prices. 
C) monetary function of prices. 
D) circular flow of income.

Question 19

Refer to the figure.If box A represents businesses and flow (7) represents goods and services, then:

Accepted Answer

A) box D is the product market and box B is the factor market. 
B) box D is the product market and box B is households. 
C) box B is the product market and box C is households. 
D) box C is the product market and box B is the factor market. 
A) box D is the product market and box B is the factor market. 
B) box D is the product market and box B is households. 
C) box B is the product market and box C is households. 
D) box C is the product market and box B is the factor market.

Question 20

The wants of consumers are expressed on the demand side of the product market.

Accepted Answer

A) True 
 B)False

Exam 2: B: The Market System and the Circular Flow

The most important consequence of property rights is that

Property rights are important because they:

Households and businesses are both suppliers in the product market.

Which would not be characteristic of a capitalist economy?

Specialization in production is economically beneficial primarily because it:

The "invisible hand" refers to the many indirect controls which the federal government imposes in a system of mixed capitalism.

On the basis of the information provided and assuming trade occurs between the three provinces we can expect:

Refer to the circular flow model of the economy.In the diagram flow (2) represents:

The process in which workers select specialized tasks to make a product is referred to as:

The two basic markets shown by the simple circular flow model are:

_____ helps avoid the problems posed by the lack of double coincidence of wants.

The term "mixed economy" refers to an economy:

The most efficient combination of resources in producing any output is that combination which:

Which of the following is not a part of a market system?

What to produce in a market economy is ultimately determined by the:

Freedom of choice enables:

The development of the Internet and e-mail to replace regular mail services in many cases would be an example of:

The market system communicates changes in supply and demand and elicits appropriate responses from businesses and resource suppliers.This is known as the:

Refer to the figure.If box A represents businesses and flow (7) represents goods and services, then:

The wants of consumers are expressed on the demand side of the product market.

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

A: - The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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