Question 1

The division of labor means that

Accepted Answer

A)  labor 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)  labor 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 2

How does human specialization contribute toward increasing an economy's output?

Accepted Answer

A)  It exploits the differences in abilities. 
B)  It is a process of creative destruction. 
C)  It pushes each worker to master the whole product. 
D)  It encourages people to be "jacks-of-all-trades." 
A)  It exploits the differences in abilities. 
B)  It is a process of creative destruction. 
C)  It pushes each worker to master the whole product. 
D)  It encourages people to be "jacks-of-all-trades."

Question 3

Market economies use capital goods because they improve productive efficiency.

Accepted Answer

A) True 
 B)False

Question 4

Specialization in production is economically beneficial primarily because it

Accepted Answer

A)  allows everyone to have a job that he or she likes. 
B)  permits the production of a larger output with fixed amounts of resources. 
C)  facilitates trade by bartering. 
D)  guarantees full employment. 
A)  allows everyone to have a job that he or she likes. 
B)  permits the production of a larger output with fixed amounts of resources. 
C)  facilitates trade by bartering. 
D)  guarantees full employment.

Question 5

Property rights give the government the right to own, use, and dispose of resources in an economy.

Accepted Answer

A) True 
 B)False

Question 6

The market economy is regarded as "efficient" in that

Accepted Answer

A)  it achieves the lowest rate of unemployment. 
B)  it leads to the lowest level of poverty in the society. 
C)  it directs resources toward products that the society wants most. 
D)  it puts the best people in government positions. 
A)  it achieves the lowest rate of unemployment. 
B)  it leads to the lowest level of poverty in the society. 
C)  it directs resources toward products that the society wants most. 
D)  it puts the best people in government positions.

Question 7

A production system where various workers concentrate on different specialized tasks to contribute toward a whole product is referred to as

Accepted Answer

A)  a coincidence of wants. 
B)  roundabout production. 
C)  freedom of enterprise 
D)  division of labor. 
A)  a coincidence of wants. 
B)  roundabout production. 
C)  freedom of enterprise 
D)  division of labor.

Question 8

One basic problem faced by central planners, but hardly present in a market system, has to do with

Accepted Answer

A)  determining the production goals or targets in a factory. 
B)  having limited resources and trying to match them with unlimited wants. 
C)  coordinating production in various industries so that bottlenecks do not develop. 
D)  providing financial resources for increasing the real flows of products in the economy. 
A)  determining the production goals or targets in a factory. 
B)  having limited resources and trying to match them with unlimited wants. 
C)  coordinating production in various industries so that bottlenecks do not develop. 
D)  providing financial resources for increasing the real flows of products in the economy.

Question 9

The wants of consumers are expressed in the product market with "dollar votes."

Accepted Answer

A) True 
 B)False

Question 10

(Consider This) Since World War II,

Accepted Answer

A)  North Korea's command economy has significantly outperformed South Korea's market economy. 
B)  South Korea's command economy has significantly outperformed North Korea's market economy. 
C)  North Korea's market economy has significantly outperformed South Korea's command economy. 
D)  South Korea's market economy has significantly outperformed North Korea's command economy. 
A)  North Korea's command economy has significantly outperformed South Korea's market economy. 
B)  South Korea's command economy has significantly outperformed North Korea's market economy. 
C)  North Korea's market economy has significantly outperformed South Korea's command economy. 
D)  South Korea's market economy has significantly outperformed North Korea's command economy.

Question 11

The term dollar votes in a market system means

Accepted Answer

A)  inflation will occur if consumers don't spend wisely. 
B)  voters may be offered dollars to help elect certain political candidates. 
C)  government is responsible for determining what will be considered legal tender. 
D)  consumers "vote" for certain products to be produced by how they spend their incomes. 
A)  inflation will occur if consumers don't spend wisely. 
B)  voters may be offered dollars to help elect certain political candidates. 
C)  government is responsible for determining what will be considered legal tender. 
D)  consumers "vote" for certain products to be produced by how they spend their incomes.

Question 12

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

Accepted Answer

A)  The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest. 
B)  The inability to substitute resources creates a conflict between private and public interests and calls for government intervention. 
C)  The market system is the best system for overcoming the scarce resources-unlimited wants problem. 
D)  Central direction by the government will improve resource allocation in a capitalistic economy. 
A)  The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest. 
B)  The inability to substitute resources creates a conflict between private and public interests and calls for government intervention. 
C)  The market system is the best system for overcoming the scarce resources-unlimited wants problem. 
D)  Central direction by the government will improve resource allocation in a capitalistic economy.

Question 13

In a market system, a firm's employees are typically shielded from business risk by

Accepted Answer

A)  profit-sharing agreements. 
B)  wage contracts. 
C)  the Social Security program. 
D)  paid vacation leaves. 
A)  profit-sharing agreements. 
B)  wage contracts. 
C)  the Social Security program. 
D)  paid vacation leaves.

Question 14

(Last Word) According to economist Donald Boudreaux, the world's tens of billions of individual resources get arranged productively

Accepted Answer

A)  because government has become highly effective at central planning. 
B)  because private property encourages people to consider the alternative uses of their resources and select those that provide the most rewards. 
C)  because people tend to be creative and orderly. 
D)  through random trial and error. 
A)  because government has become highly effective at central planning. 
B)  because private property encourages people to consider the alternative uses of their resources and select those that provide the most rewards. 
C)  because people tend to be creative and orderly. 
D)  through random trial and error.

Question 15

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 16

Profits are the primary "success indicator" for firms in a centrally planned economy.

Accepted Answer

A) True 
 B)False

Question 17

If economic profits in a particular industry increase, then we would expect

Accepted Answer

A)  resources to be diverted away from that industry. 
B)  firms in that industry to produce less output. 
C)  firms to enter that industry, thus expanding it. 
D)  consumers to buy less from that industry. 
A)  resources to be diverted away from that industry. 
B)  firms in that industry to produce less output. 
C)  firms to enter that industry, thus expanding it. 
D)  consumers to buy less from that industry.

Question 18

Which is an example of barter?

Accepted Answer

A)  a person trades a desk for a box of tools 
B)  a person buys clothes at a used clothing store 
C)  a gift of tuition money from parents to their children 
D)  the purchase of stock on the New York Stock Exchange 
A)  a person trades a desk for a box of tools 
B)  a person buys clothes at a used clothing store 
C)  a gift of tuition money from parents to their children 
D)  the purchase of stock on the New York Stock Exchange

Question 19

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 20

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.

Accepted Answer

A) True 
 B)False

Exam 2: The Market System and the Circular Flow

The division of labor means that

How does human specialization contribute toward increasing an economy's output?

Market economies use capital goods because they improve productive efficiency.

Specialization in production is economically beneficial primarily because it

Property rights give the government the right to own, use, and dispose of resources in an economy.

The market economy is regarded as "efficient" in that

A production system where various workers concentrate on different specialized tasks to contribute toward a whole product is referred to as

One basic problem faced by central planners, but hardly present in a market system, has to do with

The wants of consumers are expressed in the product market with "dollar votes."

(Consider This) Since World War II,

The term dollar votes in a market system means

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

In a market system, a firm's employees are typically shielded from business risk by

(Last Word) According to economist Donald Boudreaux, the world's tens of billions of individual resources get arranged productively

The economic function of profits and losses is to

Profits are the primary "success indicator" for firms in a centrally planned economy.

If economic profits in a particular industry increase, then we would expect

Which is an example of barter?

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

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.

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