Question 1

Consumer sovereignty and "dollar votes" guide the market system in dealing with which fundamental economic question?

Accepted Answer

A)  Which output will be produced? 
B)  How is the output to be produced? 
C)  How can the system accommodate change? 
D)  Who is to receive the output? 
A)  Which output will be produced? 
B)  How is the output to be produced? 
C)  How can the system accommodate change? 
D)  Who is to receive the output?

Question 2

Which of the following best describes the "invisible hand" concept?

Accepted Answer

A)  Ample regulation of business by the government will maximize the public's best interests. 
B)  The market system works best when resources are free to move from one use to another. 
C)  The problem of scarcity can best be overcome in a system of mixed capitalism. 
D)  Self-interest in a market system will automatically promote the public interest as well. 
A)  Ample regulation of business by the government will maximize the public's best interests. 
B)  The market system works best when resources are free to move from one use to another. 
C)  The problem of scarcity can best be overcome in a system of mixed capitalism. 
D)  Self-interest in a market system will automatically promote the public interest as well.

Question 3

The invisible hand promotes society's interests because

Accepted Answer

A)  individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase. 
B)  individuals will produce goods for others out of concern for their fellow human beings. 
C)  it makes sure that everyone wins from competition in the market. 
D)  government regulation pushes business into producing the right mix of goods and services. 
A)  individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase. 
B)  individuals will produce goods for others out of concern for their fellow human beings. 
C)  it makes sure that everyone wins from competition in the market. 
D)  government regulation pushes business into producing the right mix of goods and services.

Question 4

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.

Question 5

According to the circular flow model of the market system, firms get their ability to pay for their costs of production from the revenues that they receive for their products.

Accepted Answer

A) True 
 B)False

Question 6

Property rights are important because they

Accepted Answer

A)  ensure an equal distribution of income. 
B)  encourage cooperation by improving the chances of mutually agreeable transactions. 
C)  guarantee that any exchange will make all parties better off than prior to the exchange. 
D)  allow the government to control how resources are allocated. 
A)  ensure an equal distribution of income. 
B)  encourage cooperation by improving the chances of mutually agreeable transactions. 
C)  guarantee that any exchange will make all parties better off than prior to the exchange. 
D)  allow the government to control how resources are allocated.

Question 7

In a competitive market economy, firms select the least-cost production technique because

Accepted Answer

A)  such choices will result in full employment of available resources. 
B)  to do so will maximize the firms' profits. 
C)  this will prevent new firms from entering the industry. 
D)  "dollar voting" by consumers mandates such a choice. 
A)  such choices will result in full employment of available resources. 
B)  to do so will maximize the firms' profits. 
C)  this will prevent new firms from entering the industry. 
D)  "dollar voting" by consumers mandates such a choice.

Question 8

The major virtues of the market system include all of the following, except

Accepted Answer

A)  it promotes an efficient allocation of resources. 
B)  it leads to equality in the distribution of income. 
C)  it provides incentives for greater production and higher incomes. 
D)  it emphasizes the freedom to pursue self-interest. 
A)  it promotes an efficient allocation of resources. 
B)  it leads to equality in the distribution of income. 
C)  it provides incentives for greater production and higher incomes. 
D)  it emphasizes the freedom to pursue self-interest.

Question 9

Which of the following is not one of the five fundamental questions that an economy must deal with?

Accepted Answer

A)  How will the goods and services be produced? 
B)  Why should the goods and services be produced? 
C)  Who is to receive the goods and services produced in the economy? 
D)  In what ways will progress be promoted? 
A)  How will the goods and services be produced? 
B)  Why should the goods and services be produced? 
C)  Who is to receive the goods and services produced in the economy? 
D)  In what ways will progress be promoted?

Question 10

In a market system, the "What will be produced?" question is ultimately decided by

Accepted Answer

A)  profitability of products. 
B)  costs of production. 
C)  workers in the firms. 
D)  industry analysts. 
A)  profitability of products. 
B)  costs of production. 
C)  workers in the firms. 
D)  industry analysts.

Question 11

In the resource market,

Accepted Answer

A)  businesses borrow financial capital from households. 
B)  businesses sell services to households. 
C)  households sell resources to businesses. 
D)  firms sell raw materials to households. 
A)  businesses borrow financial capital from households. 
B)  businesses sell services to households. 
C)  households sell resources to businesses. 
D)  firms sell raw materials to households.

Question 12

Refer to the provided figure. If box A represents households, B the product market, and C businesses, then flow (2) and flow (4) would represent

Accepted Answer

A)  the flow of labor and other resources. 
B)  the flow of goods and services. 
C)  business spending revenues 
D)  money incomes and consumer spending. 
A)  the flow of labor and other resources. 
B)  the flow of goods and services. 
C)  business spending revenues 
D)  money incomes and consumer spending.

Question 13

Refer to the provided figure. If box A represents households, D the resource market, and C businesses, then flow (8) would represent , while flow (7) would represent _.

Accepted Answer

A)  goods and services; consumption expenditures 
B)  consumption expenditures; goods and services 
C)  resources; money income 
D)  money income; resources 
A)  goods and services; consumption expenditures 
B)  consumption expenditures; goods and services 
C)  resources; money income 
D)  money income; resources

Question 14

The market system's answer to the fundamental question "What will be produced?" is essentially

Accepted Answer

A)  "Goods and services that are profitable." 
B)  "Low-cost goods and services." 
C)  "Goods and services that can be produced using large amounts of capital." 
D)  "Goods and services that possess lasting value." 
A)  "Goods and services that are profitable." 
B)  "Low-cost goods and services." 
C)  "Goods and services that can be produced using large amounts of capital." 
D)  "Goods and services that possess lasting value."

Question 15

The economies of North Korea and Cuba are

Accepted Answer

A)  similar in that they are both basically command systems. 
B)  similar in that they are both basically market systems. 
C)  different in that North Korea has a command system, while Cuba has a market system. 
D)  different in that Cuba has a command system, while North Korea has a market system. 
A)  similar in that they are both basically command systems. 
B)  similar in that they are both basically market systems. 
C)  different in that North Korea has a command system, while Cuba has a market system. 
D)  different in that Cuba has a command system, while North Korea has a market system.

Question 16

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

Accepted Answer

A)  partnerships 
B)  corporations 
C)  sole proprietorships 
D)  in all of the businesses listed in the other answers 
A)  partnerships 
B)  corporations 
C)  sole proprietorships 
D)  in all of the businesses listed in the other answers

Question 17

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 18

Property rights give to some people the right to coerce others into giving up their property.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a distinguishing feature of laissez-faire capitalism?

Accepted Answer

A)  public ownership of all capital 
B)  central planning 
C)  minimal government intervention 
D)  a circular flow of goods, resources, and money 
A)  public ownership of all capital 
B)  central planning 
C)  minimal government intervention 
D)  a circular flow of goods, resources, and money

Question 20

If a competitive industry is neither expanding nor contracting, we would expect

Accepted Answer

A)  total revenue to be zero. 
B)  economic profits to be zero. 
C)  total opportunity cost to be zero. 
D)  more resources to flow to that industry. 
A)  total revenue to be zero. 
B)  economic profits to be zero. 
C)  total opportunity cost to be zero. 
D)  more resources to flow to that industry.

Exam 2: The Market System and the Circular Flow

Consumer sovereignty and "dollar votes" guide the market system in dealing with which fundamental economic question?

Which of the following best describes the "invisible hand" concept?

The invisible hand promotes society's interests because

The main mechanism that regulates the market system is

According to the circular flow model of the market system, firms get their ability to pay for their costs of production from the revenues that they receive for their products.

Property rights are important because they

In a competitive market economy, firms select the least-cost production technique because

The major virtues of the market system include all of the following, except

Which of the following is not one of the five fundamental questions that an economy must deal with?

In a market system, the "What will be produced?" question is ultimately decided by

In the resource market,

Refer to the provided figure. If box A represents households, B the product market, and C businesses, then flow (2) and flow (4) would represent

Refer to the provided figure. If box A represents households, D the resource market, and C businesses, then flow (8) would represent , while flow (7) would represent _.

The market system's answer to the fundamental question "What will be produced?" is essentially

The economies of North Korea and Cuba are

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

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

Property rights give to some people the right to coerce others into giving up their property.

Which of the following is a distinguishing feature of laissez-faire capitalism?

If a competitive industry is neither expanding nor contracting, we would expect

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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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