Question 1

A required element for specialization to lead to an increase in the satisfaction of society's wants is

Accepted Answer

A) a capitalist economy. 
B) exchange and trade. 
C) the use of money. 
D) a central plan. 
A) a capitalist economy. 
B) exchange and trade. 
C) the use of money. 
D) a central plan.

Question 2

Which of the following best illustrates the circular flow model in action?

Accepted Answer

A) Bobbie goes to work and builds cars; she uses the income she receives to buy food at the grocery store. 
B) Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier and uses the rest to take her family out to dinner. 
C) Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers. 
D) All of these answers illustrate the workings of the circular flow model. 
A) Bobbie goes to work and builds cars; she uses the income she receives to buy food at the grocery store. 
B) Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier and uses the rest to take her family out to dinner. 
C) Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers. 
D) All of these answers illustrate the workings of the circular flow model.

Question 3

(Consider This) Which of the following statements about insurance and risk is true?

Accepted Answer

A) Insurance inhibits economic growth and investment by discouraging risk-taking. 
B) Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk. 
C) Insurance companies always earn profits because insurance premiums always exceed the payout for insured events. 
D) Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk. 
A) Insurance inhibits economic growth and investment by discouraging risk-taking. 
B) Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk. 
C) Insurance companies always earn profits because insurance premiums always exceed the payout for insured events. 
D) Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk.

Question 4

A market system tends to restrict business risk to owners and investors.This results in which of the following benefits?

Accepted Answer

A) It encourages more people to become entrepreneurs. 
B) Firms have to pay more to attract inputs, as these inputs have to share the risk. 
C) Firms focus attention on prudent risk management, as it is profitable to manage risk. 
D) Income becomes more equally distributed. 
A) It encourages more people to become entrepreneurs. 
B) Firms have to pay more to attract inputs, as these inputs have to share the risk. 
C) Firms focus attention on prudent risk management, as it is profitable to manage risk. 
D) Income becomes more equally distributed.

Question 5

The money income of households consists of all the following, except

Accepted Answer

A) wages. 
B) profits. 
C) interest. 
D) revenues. 
A) wages. 
B) profits. 
C) interest. 
D) revenues.

Question 6

The market system is said to be characterized by "consumer sovereignty." This is because

Accepted Answer

A) a sovereign government determines which consumer goods will be produced. 
B) the prices of consumer goods are regulated by a sovereign government. 
C) firms must match their production decisions to the consumers' choices. 
D) consumer goods are considered to be more important than capital goods.Difficulty: 02 Medium 
A) a sovereign government determines which consumer goods will be produced. 
B) the prices of consumer goods are regulated by a sovereign government. 
C) firms must match their production decisions to the consumers' choices. 
D) consumer goods are considered to be more important than capital goods.Difficulty: 02 Medium

Question 7

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Accepted Answer

A) Freakonomics. 
B) The Principles of Economics. 
C) The Age of the Economist. 
D) The Wealth of Nations.Difficulty: 02 Medium 
A) Freakonomics. 
B) The Principles of Economics. 
C) The Age of the Economist. 
D) The Wealth of Nations.Difficulty: 02 Medium

Exam 2: The Market System and the Circular Flow

A required element for specialization to lead to an increase in the satisfaction of society's wants is

Which of the following best illustrates the circular flow model in action?

(Consider This) Which of the following statements about insurance and risk is true?

A market system tends to restrict business risk to owners and investors.This results in which of the following benefits?

The money income of households consists of all the following, except

The market system is said to be characterized by "consumer sovereignty." This is because

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Limits, Alternatives, and Choices

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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