Question 1

In a market system, the income earned by owners of natural resources is called interest income.

Accepted Answer

A) True 
 B)False

Question 2

In a market system, employees and suppliers

Accepted Answer

A)  are usually shielded from risk, but at the cost of not sharing in the profits of the firm. 
B)  are usually shielded from risk and share in the profits of the firm. 
C)  are generally subject to as much risk as firm owners but get to share in the profits. 
D)  bear as much risk as firm owners but don't get to share in the profits. 
A)  are usually shielded from risk, but at the cost of not sharing in the profits of the firm. 
B)  are usually shielded from risk and share in the profits of the firm. 
C)  are generally subject to as much risk as firm owners but get to share in the profits. 
D)  bear as much risk as firm owners but don't get to share in the profits.

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

In a market system, which of the following is a major benefit of making the firm's owners and investors exclusively shoulder the business risk?

Accepted Answer

A)  Those who deeply dislike business risk will not have anything to do with the business. 
B)  This allows firms to more easily attract labor and other suppliers of inputs. 
C)  This reduces the business risk in the economy. 
D)  It makes it easier for the government to monitor and manage the business risk. 
A)  Those who deeply dislike business risk will not have anything to do with the business. 
B)  This allows firms to more easily attract labor and other suppliers of inputs. 
C)  This reduces the business risk in the economy. 
D)  It makes it easier for the government to monitor and manage the business risk.

Question 5

The market system's answer to the fundamental question "How will the system promote progress?" is essentially

Accepted Answer

A)  "Through government-funded research programs." 
B)  "Through redistribution of income to promote greater equality." 
C)  "Through training and retraining programs." 
D)  "Through the profit potential that encourages development of new technology." 
A)  "Through government-funded research programs." 
B)  "Through redistribution of income to promote greater equality." 
C)  "Through training and retraining programs." 
D)  "Through the profit potential that encourages development of new technology."

Question 6

Which of the following statements is true about risk management in market systems versus command systems?

Accepted Answer

A)  Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, whereas in command systems government decision makers don't bear those costs. 
B)  Neither system is better than the other in terms of risk management; both systems are equally susceptible to natural disasters and changes in consumer preferences. 
C)  Command systems manage risk better because the government controls most economic activity and can therefore eliminate risk. 
D)  Market systems face risk because of the possibility of profits and losses; command systems don't face risk because they are not profit driven. 
A)  Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, whereas in command systems government decision makers don't bear those costs. 
B)  Neither system is better than the other in terms of risk management; both systems are equally susceptible to natural disasters and changes in consumer preferences. 
C)  Command systems manage risk better because the government controls most economic activity and can therefore eliminate risk. 
D)  Market systems face risk because of the possibility of profits and losses; command systems don't face risk because they are not profit driven.

Question 7

International specialization and trade

Accepted Answer

A)  has to be done on a barter system. 
B)  often requires the exchange of currencies. 
C)  does not illustrate the division of labor. 
D)  requires active government regulation. 
A)  has to be done on a barter system. 
B)  often requires the exchange of currencies. 
C)  does not illustrate the division of labor. 
D)  requires active government regulation.

Question 8

The invisible hand concept suggests that

Accepted Answer

A)  market failures imply the need for a national economic plan. 
B)  big businesses are inherently more efficient than small businesses. 
C)  the competitiveness of a capitalistic market economy invariably diminishes over time. 
D)  assuming competition, private and public interests will coincide. 
A)  market failures imply the need for a national economic plan. 
B)  big businesses are inherently more efficient than small businesses. 
C)  the competitiveness of a capitalistic market economy invariably diminishes over time. 
D)  assuming competition, private and public interests will coincide.

Question 9

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity   In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s)

Accepted Answer

A)  1. 
B)  2 and 4. 
C)  3. 
D)  1 and 3. 
A)  1. 
B)  2 and 4. 
C)  3. 
D)  1 and 3.

Question 10

In a market system, a consumer's ability to pay-but not necessarily his willingness to pay-is largely based on his income.

Accepted Answer

A) True 
 B)False

Question 11

In a market system, more resources will move toward an industry and expand its production if the industry has

Accepted Answer

A)  positive revenues. 
B)  positive costs. 
C)  TC  TR. 
A)  positive revenues. 
B)  positive costs. 
C)  TC  TR.

Question 12

In the circular flow diagram, households get their ability to pay for their consumption expenditures from the

Accepted Answer

A)  revenues they receive for their products. 
B)  costs they incur for resources. 
C)  incomes they earn for their resources. 
D)  goods and services they get in the product markets. 
A)  revenues they receive for their products. 
B)  costs they incur for resources. 
C)  incomes they earn for their resources. 
D)  goods and services they get in the product markets.

In a market system, the income earned by owners of natural resources is called interest income.

In a market system, employees and suppliers

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

In a market system, which of the following is a major benefit of making the firm's owners and investors exclusively shoulder the business risk?

The market system's answer to the fundamental question "How will the system promote progress?" is essentially

Which of the following statements is true about risk management in market systems versus command systems?

International specialization and trade

The invisible hand concept suggests that

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s)

In a market system, a consumer's ability to pay-but not necessarily his willingness to pay-is largely based on his income.

In a market system, more resources will move toward an industry and expand its production if the industry has

In the circular flow diagram, households get their ability to pay for their consumption expenditures from the

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

Filters

Exam 2: The Market System and the Circular Flow

In a market system, the income earned by owners of natural resources is called interest income.

In a market system, employees and suppliers

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

In a market system, which of the following is a major benefit of making the firm's owners and investors exclusively shoulder the business risk?

The market system's answer to the fundamental question "How will the system promote progress?" is essentially

Which of the following statements is true about risk management in market systems versus command systems?

International specialization and trade

The invisible hand concept suggests that

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity In view of the indicated resource prices, the economically most efficient production technique(s) is (are) technique(s)

In a market system, a consumer's ability to pay-but not necessarily his willingness to pay-is largely based on his income.

In a market system, more resources will move toward an industry and expand its production if the industry has

In the circular flow diagram, households get their ability to pay for their consumption expenditures from the

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

Filters