Question 1

In a command system,

Accepted Answer

A) self-interest motivates and commands each business firm's decisions and actions. 
B) the head of each family decides and commands what to do with the family's resources. 
C) a government-appointed planning board makes production and allocation decisions. 
D) market traders command what outputs are produced and how they are allocated. 
A) self-interest motivates and commands each business firm's decisions and actions. 
B) the head of each family decides and commands what to do with the family's resources. 
C) a government-appointed planning board makes production and allocation decisions. 
D) market traders command what outputs are produced and how they are allocated.

Question 2

The invisible hand refers to the

Accepted Answer

A) fact that the U.S.tax system redistributes income from rich to poor. 
B) notion that, under competition, decisions motivated by self-interest promote the social interest. 
C) tendency of monopolistic sellers to raise prices above competitive levels. 
D) fact that government controls the functioning of the market system. 
A) fact that the U.S.tax system redistributes income from rich to poor. 
B) notion that, under competition, decisions motivated by self-interest promote the social interest. 
C) tendency of monopolistic sellers to raise prices above competitive levels. 
D) fact that government controls the functioning of the market system.

Question 3

Examples of command economies are

Accepted Answer

A) the United States and Japan. 
B) Sweden and Norway. 
C) Mexico and Brazil. 
D) Cuba and North Korea. 
A) the United States and Japan. 
B) Sweden and Norway. 
C) Mexico and Brazil. 
D) Cuba and North Korea.

Question 4

Capitalism gets its name from the fact that capital resources are mostly

Accepted Answer

A) owned by the state or government. 
B) given the highest priorit y in the economy's income distribution. 
C) treated as private property. 
D) in the form of money and financial resources. 
A) owned by the state or government. 
B) given the highest priorit y in the economy's income distribution. 
C) treated as private property. 
D) in the form of money and financial resources.

Question 5

Being a "jack-of-all-trades" implies reducing the reliance on the division of labor.

Accepted Answer

A) True 
 B)False

Question 6

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially

Accepted Answer

A) "With as much machinery as possible." 
B) "Using the latest technology." 
C) "By exploiting labor." 
D) "In ways that minimize the cost per unit of output." 
A) "With as much machinery as possible." 
B) "Using the latest technology." 
C) "By exploiting labor." 
D) "In ways that minimize the cost per unit of output."

Question 7

Which of the following would be primarily determined in the resource markets?

Accepted Answer

A) the airfares charged by airlines for family vacations 
B) the wage rates for computer programmers and engineers 
C) the number of home-Internet connections installed 
D) the amount of money in circulation issued by the government 
A) the airfares charged by airlines for family vacations 
B) the wage rates for computer programmers and engineers 
C) the number of home-Internet connections installed 
D) the amount of money in circulation issued by the government

Question 8

"Consumer sovereignty" refers to the

Accepted Answer

A) fact that resource prices are higher than product prices in capitalistic economies. 
B) idea that the pursuit of self-interest is in the public interest. 
C) idea that the decisions of producers must ultimately conform to consumer demands. 
D) fact that a federal agency exists to protect consumers from harmful and defective products. 
A) fact that resource prices are higher than product prices in capitalistic economies. 
B) idea that the pursuit of self-interest is in the public interest. 
C) idea that the decisions of producers must ultimately conform to consumer demands. 
D) fact that a federal agency exists to protect consumers from harmful and defective products.

Question 9

Which of the following is necessary to make a trade in a barter economy?

Accepted Answer

A) money 
B) unlimited wants 
C) a medium of exchange 
D) a coincidence of wants 
A) money 
B) unlimited wants 
C) a medium of exchange 
D) a coincidence of wants

Question 10

Why might a company use barter rather than money to make a trade?

Accepted Answer

A) Barter trade is generally more efficient than money-based trade. 
B) Barter can enable two firms to trade when their cash flows are limited. 
C) Money requires a coincidence of wants; barter is more direct. 
D) Money is efficient only for large transactions, so barter is preferred for smaller transactions. 
A) Barter trade is generally more efficient than money-based trade. 
B) Barter can enable two firms to trade when their cash flows are limited. 
C) Money requires a coincidence of wants; barter is more direct. 
D) Money is efficient only for large transactions, so barter is preferred for smaller transactions.

Question 11

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question 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 12

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by

Accepted Answer

A) the state and government. 
B) markets and prices. 
C) a central planning agency. 
D) an international organization. 
A) the state and government. 
B) markets and prices. 
C) a central planning agency. 
D) an international organization.

Question 13

The economic function of profits and losses is to

Accepted Answer

A) bring about a more equal distribution of income. 
B) signal that resources should be reallocated. 
C) eliminate small firms and reduce competition. 
D) tell government which industries need to be subsidized. 
A) bring about a more equal distribution of income. 
B) signal that resources should be reallocated. 
C) eliminate small firms and reduce competition. 
D) tell government which industries need to be subsidized.

Question 14

Having a high fixed salary is what motivates entrepreneurs to make prudent decisions is dealing with business risk.

Accepted Answer

A) True 
 B)False

Question 15

If people tried to produce most of what they need on their own, then this would lead to a more efficient use of the economy's resources.Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.Test Bank: II Topic: Characteristics of the Market System

Accepted Answer

A) True 
 B)False

Question 16

The simple circular flow model shows that

Accepted Answer

A) households are on the buying side of both product and resource markets. 
B) businesses are on the selling side of both product and resource markets. 
C) households are on the selling side of the resource market and on the buying side of the product market. 
D) businesses are on the buying side of the product market and on the selling side of the resource market. 
A) households are on the buying side of both product and resource markets. 
B) businesses are on the selling side of both product and resource markets. 
C) households are on the selling side of the resource market and on the buying side of the product market. 
D) businesses are on the buying side of the product market and on the selling side of the resource market.

Question 17

The development of the digital video camera, which replaced film video cameras, is 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

Which of the following does not illustrate the idea of creative destruction?

Accepted Answer

A) Digital downloads have shrunk the market for CDs and DVDs. 
B) Online retail sales have increased, while brick-and-mortar sales have slowed down. 
C) The opening of a new mall reduces the traffic in another mall. 
D) A firm has to destroy some of the expired products in its inventory. 
A) Digital downloads have shrunk the market for CDs and DVDs. 
B) Online retail sales have increased, while brick-and-mortar sales have slowed down. 
C) The opening of a new mall reduces the traffic in another mall. 
D) A firm has to destroy some of the expired products in its inventory.

Question 19

The concept of consumer sovereignty refers to the situation where consumers have the right to vote for the board of directors of large corporations.

Accepted Answer

A) True 
 B)False

Question 20

The main mechanism that regulates the market system is

Accepted Answer

A) self-interest. 
B) private property. 
C) competition. 
D) freedom of enterprise and choice. 
A) self-interest. 
B) private property. 
C) competition. 
D) freedom of enterprise and choice.

Exam 2: The Market System and the Circular Flow

In a command system,

The invisible hand refers to the

Examples of command economies are

Capitalism gets its name from the fact that capital resources are mostly

Being a "jack-of-all-trades" implies reducing the reliance on the division of labor.

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially

Which of the following would be primarily determined in the resource markets?

"Consumer sovereignty" refers to the

Which of the following is necessary to make a trade in a barter economy?

Why might a company use barter rather than money to make a trade?

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily in the

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by

The economic function of profits and losses is to

Having a high fixed salary is what motivates entrepreneurs to make prudent decisions is dealing with business risk.

If people tried to produce most of what they need on their own, then this would lead to a more efficient use of the economy's resources.Difficulty: 01 Easy Learning Objective: 02-02 List the main characteristics of the market system.Test Bank: II Topic: Characteristics of the Market System

The simple circular flow model shows that

The development of the digital video camera, which replaced film video cameras, is an example of

Which of the following does not illustrate the idea of creative destruction?

The concept of consumer sovereignty refers to the situation where consumers have the right to vote for the board of directors of large corporations.

The main mechanism that regulates the market system is

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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