Question 1

Specialization and trade are beneficial to society because:

Accepted Answer

A) the output of economic goods may be increased with no increase in resources. 
B) scarce resources are utilized more efficiently. 
C) a division of labour lowers prices for products. 
D) all of the above are correct. 
A) the output of economic goods may be increased with no increase in resources. 
B) scarce resources are utilized more efficiently. 
C) a division of labour lowers prices for products. 
D) all of the above are correct.

Question 2

Which of the following economic systems are polar opposites of each other?

Accepted Answer

A) The market system and laissez-faire capitalism 
B) The market system and the command system 
C) The command system and laissez-faire capitalism 
D) Mixed market and the market system 
A) The market system and laissez-faire capitalism 
B) The market system and the command system 
C) The command system and laissez-faire capitalism 
D) Mixed market and the market system

Question 3

In the circular flow diagram, revenues and goods and services flow:

Accepted Answer

A) in opposite directions but are on the same side of the diagram. 
B) in the same direction but are on the same side of the diagram. 
C) in either direction as they are not correlated. 
D) in opposite directions and are on opposite sides of the diagram. 
A) in opposite directions but are on the same side of the diagram. 
B) in the same direction but are on the same side of the diagram. 
C) in either direction as they are not correlated. 
D) in opposite directions and are on opposite sides of the diagram.

Question 4

The market system is an economic system that:

Accepted Answer

A) produces more consumer goods than capital goods. 
B) produces more capital goods than consumer goods. 
C) gives private individuals and institutions the right to own resources used in production. 
D) gives the government the right to tax individuals and corporations for the production of capital goods. 
A) produces more consumer goods than capital goods. 
B) produces more capital goods than consumer goods. 
C) gives private individuals and institutions the right to own resources used in production. 
D) gives the government the right to tax individuals and corporations for the production of capital goods.

Question 5

Which of the following best describes the "guiding function" of competitive prices?

Accepted Answer

A) Profitable industries tend to contract and unprofitable industries tend to expand. 
B) The market system will always generate economic profits for firms which use the least costly production technology. 
C) The market system can negotiate reallocations of resources which are appropriate to changes in consumer tastes, technology, and resource supplies. 
D) When prices are in equilibrium, product shortages or surpluses cannot occur. 
A) Profitable industries tend to contract and unprofitable industries tend to expand. 
B) The market system will always generate economic profits for firms which use the least costly production technology. 
C) The market system can negotiate reallocations of resources which are appropriate to changes in consumer tastes, technology, and resource supplies. 
D) When prices are in equilibrium, product shortages or surpluses cannot occur.

Question 6

The development of new technology and capital goods are essential elements for the market system.This is because:

Accepted Answer

A) using more efficient production processes means more output for the economy. 
B) more capital goods means less future consumption goods. 
C) the standard of living and development of new technology are inversely related. 
D) the most direct methods of production are more efficient. 
A) using more efficient production processes means more output for the economy. 
B) more capital goods means less future consumption goods. 
C) the standard of living and development of new technology are inversely related. 
D) the most direct methods of production are more efficient.

Question 7

Assume the demand for product Y increases and the subsequent market system responses result in the production of more Y.This illustrates:

Accepted Answer

A) that the concept of derived demand is inapplicable. 
B) that consumer sovereignty is inoperative in this economy. 
C) the scarcity function of prices. 
D) the directing or guiding function of prices. 
A) that the concept of derived demand is inapplicable. 
B) that consumer sovereignty is inoperative in this economy. 
C) the scarcity function of prices. 
D) the directing or guiding function of prices.

Question 8

Which is characteristic of the capitalistic ideology?

Accepted Answer

A) unselfish individuals 
B) centralized decision-making 
C) free enterprise and choice 
D) government ownership of the means of production 
A) unselfish individuals 
B) centralized decision-making 
C) free enterprise and choice 
D) government ownership of the means of production

Question 9

A characteristic of the market system is:

Accepted Answer

A) extensive use of price controls. 
B) extensive use of barter. 
C) extensive use of capital goods. 
D) low interest rates. 
A) extensive use of price controls. 
B) extensive use of barter. 
C) extensive use of capital goods. 
D) low interest rates.

Question 10

In terms of the circular flow diagram households make expenditures in the _____ market and receive income through the _____ market.

Accepted Answer

A) product; financial 
B) factor; product 
C) product; factor 
D) capital; product 
A) product; financial 
B) factor; product 
C) product; factor 
D) capital; product

Question 11

Refer to the diagram.Arrows (3) and (4) represent:

Accepted Answer

A) goods and services respectively. 
B) money incomes and consumer expenditures respectively. 
C) resources and goods respectively. 
D) consumer expenditures and money income respectively. 
A) goods and services respectively. 
B) money incomes and consumer expenditures respectively. 
C) resources and goods respectively. 
D) consumer expenditures and money income respectively.

Question 12

The division of labour means that:

Accepted Answer

A) labour markets are geographically segmented. 
B) unskilled workers outnumber skilled workers. 
C) workers specialize in various production tasks. 
D) each worker performs a large number of tasks. 
A) labour markets are geographically segmented. 
B) unskilled workers outnumber skilled workers. 
C) workers specialize in various production tasks. 
D) each worker performs a large number of tasks.

Question 13

Which statement accurately summarizes the relationship between the prices of goods and their relative scarcity?

Accepted Answer

A) The price of a good is a direct function of the relative scarcity of the good. 
B) The price of a good is an inverse function of the relative scarcity of the good. 
C) The price of a good is independent of the relative scarcity of the good. 
D) High prices lead to greater relative scarcity. 
A) The price of a good is a direct function of the relative scarcity of the good. 
B) The price of a good is an inverse function of the relative scarcity of the good. 
C) The price of a good is independent of the relative scarcity of the good. 
D) High prices lead to greater relative scarcity.

Question 14

For whom is a given mix of goods and services to be produced? How, in other words, is the product to be distributed among people when such commodities and services are available? In a market economy, this problem is resolved primarily in the:

Accepted Answer

A) public sector through the mechanism of central planning. 
B) business sector through the mechanism of advertising. 
C) private sector through the earning and spending of income. 
D) money market through borrowing and saving by households and businesses. 
A) public sector through the mechanism of central planning. 
B) business sector through the mechanism of advertising. 
C) private sector through the earning and spending of income. 
D) money market through borrowing and saving by households and businesses.

Question 15

The command system is also known as:

Accepted Answer

A) the market system. 
B) pure capitalism. 
C) market socialism. 
D) socialism or communism. 
A) the market system. 
B) pure capitalism. 
C) market socialism. 
D) socialism or communism.

Question 16

A division of labour enhances society's output by permitting people to take advantage of existing differences in their abilities and skills.

Accepted Answer

A) True 
 B)False

Question 17

Suppose industry A is realizing substantial economic profits.Which of the following best describes the adjustment process which would bring about a new equilibrium?

Accepted Answer

A) Firms will leave the industry, output will fall, and product price will rise. 
B) Firms will enter the industry, output will rise, and product price will rise. 
C) Firms will leave the industry, output will rise, and product price will fall. 
D) Firms will enter the industry, output will rise, and product price will fall. 
A) Firms will leave the industry, output will fall, and product price will rise. 
B) Firms will enter the industry, output will rise, and product price will rise. 
C) Firms will leave the industry, output will rise, and product price will fall. 
D) Firms will enter the industry, output will rise, and product price will fall.

Question 18

In terms of the circular flow diagram businesses obtain revenue through the _____ market and make expenditures in the _____ market.

Accepted Answer

A) product; financial 
B) factor; product 
C) product; factor 
D) capital; product 
A) product; financial 
B) factor; product 
C) product; factor 
D) capital; product

Question 19

Given the information provided and assuming trade does occur between the provinces, we can expect:

Accepted Answer

A) that there is no means by which British Columbia can obtain lettuce while specializing in the production of autos. 
B) that money will not be needed to accomplish the desired exchanges. 
C) money to flow counterclockwise from British Columbia to Ontario to Alberta. 
D) money to flow clockwise from British Columbia to Alberta to Ontario. 
A) that there is no means by which British Columbia can obtain lettuce while specializing in the production of autos. 
B) that money will not be needed to accomplish the desired exchanges. 
C) money to flow counterclockwise from British Columbia to Ontario to Alberta. 
D) money to flow clockwise from British Columbia to Alberta to Ontario.

Question 20

Refer to the figure.If box B represents the factor market and flow (3) represents money income, then:

Accepted Answer

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

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

Specialization and trade are beneficial to society because:

Which of the following economic systems are polar opposites of each other?

In the circular flow diagram, revenues and goods and services flow:

The market system is an economic system that:

Which of the following best describes the "guiding function" of competitive prices?

The development of new technology and capital goods are essential elements for the market system.This is because:

Assume the demand for product Y increases and the subsequent market system responses result in the production of more Y.This illustrates:

Which is characteristic of the capitalistic ideology?

A characteristic of the market system is:

In terms of the circular flow diagram households make expenditures in the _____ market and receive income through the _____ market.

Refer to the diagram.Arrows (3) and (4) represent:

The division of labour means that:

Which statement accurately summarizes the relationship between the prices of goods and their relative scarcity?

For whom is a given mix of goods and services to be produced? How, in other words, is the product to be distributed among people when such commodities and services are available? In a market economy, this problem is resolved primarily in the:

The command system is also known as:

A division of labour enhances society's output by permitting people to take advantage of existing differences in their abilities and skills.

Suppose industry A is realizing substantial economic profits.Which of the following best describes the adjustment process which would bring about a new equilibrium?

In terms of the circular flow diagram businesses obtain revenue through the _____ market and make expenditures in the _____ market.

Given the information provided and assuming trade does occur between the provinces, we can expect:

Refer to the figure.If box B represents the factor market and flow (3) represents money income, then:

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

Filters

In terms of the circular flow diagram households make expenditures in the _ market and receive income through the _ market.

In terms of the circular flow diagram businesses obtain revenue through the _ market and make expenditures in the _ market.