Exam 2: The Market System and the Circular Flow

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

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

Selfishness and self-interest are identical concepts.

A market system is characterized by the private ownership of resources and the use of prices to coordinate economic activity.

"Creative destruction" in a market system is brought about by:

The market economy is regarded as "efficient" in that:

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

If people tried to produce as much of what they need on their own, then this would lead to a more efficient use of the economy's resources.

An important aspect of the market system is that producers and consumers always have to consider the public interest in making production and consumption decisions.

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

Private ownership and property rights in a market system have the following implications, except:

In a market system, resources will move away from an industry when:

The government may not implement policies intended to redistribute income in which of the following economic systems?

Which of the following is not a reason why specialization and trade are beneficial to society?

All of the following statements describe a market economy except:

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

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

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

Which of the following statements about the right to private ownership is false?

One essential trade-off involving business risk which the market system provides is reflected in which of the following?