Question 1

In a market system, the distribution of goods and services among consumers is largely determined by:

Accepted Answer

A)   The willingness and ability of consumers to pay the prices
B)   Whoever needs the goods and services the most
C)   Whoever has the closest connection to firms and the government
D)   A random factor that is almost impossible to predictE) B) and C)
F) None of the above

Question 2

Maximum profits are what motivate consumers to decide who will get the goods and services in a market system.

Accepted Answer

A) True 
 B)False

Question 3

The market system is also known as:

Accepted Answer

A)   Capitalism
B)   Socialism
C)   Central planning
D)   Production systemE) A) and C)
F) A) and B)

Question 4

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an "invisible hand," promoting the public interest.

Accepted Answer

A) True 
 B)False

Question 5

In the circular flow model of the market system, business firms:

Accepted Answer

A)   Buy products and resources
B)   Sell products and resources
C)   Buy products and sell resources
D)   Sell products and buy resourcesE) A) and B)
F) A) and C)

Question 6

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

Accepted Answer

A)   Resources
B)   Goods and services
C)   Revenues
D)   Money incomesE) A) and D)
F) A) and C)

Question 7

In a market system, which of the following will eliminate high-cost producers, and allow only the low-cost producers to survive?

Accepted Answer

A)   Competition
B)   Money
C)   A sovereign government
D)   SpecializationE) None of the above
F) A) and D)

Question 8

Which of the following statements is correct?

Accepted Answer

A)   The operation of a market system eventually results in an equal distribution of income
B)   Producers are "sovereign" in a market economy because they determine what is produced
C)   The market system is efficient at allocating resources, but not at allocating products
D)   Freedom of choice and enterprise are essential elements of the market systemE) All of the above
F) B) and C)

Question 9

If the total costs of producing 1,500 units of output is $15,000 and this output sold to consumers for a total of $16,500, then the firm would earn profits of:

Accepted Answer

A)   $1,000
B)   $16,500
C)   $1,500
D)   $15,000E) None of the above
F) A) and C)

Question 10

The economy of the United States can best be described as laissez-faire capitalism.

Accepted Answer

A) True 
 B)False

Question 11

Economic systems differ from one another based on who own the factors of production and:

Accepted Answer

A)   How much resources are available in the economy and where they are located
B)   Who make decisions regarding what to produce and how it is produced
C)   What kinds of products are produced in the economy and how plentiful they are
D)   How big the population is, and the makeup of the populationE) B) and C)
F) A) and D)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 regulationE) All of the above
F) A) and B)

Question 14

Even if prices are fixed and competition is restricted by the government, the "invisible hand" will still work in the economy and lead to economic efficiency.

Accepted Answer

A) True 
 B)False

Question 15

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 riskE) B) and D)
F) B) and C)

Question 16

Specialization is beneficial:

Accepted Answer

A)   At the individual firm level, but not at the national and international levels
B)   At the individual, regional, and even international levels
C)   Only if there are differences in the abilities of resources
D)   Only as long as money and capital goods are employedE) A) and D)
F) All of the above

Question 17

Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit.  Refer to the above table. If the price of labor declines from $3 to $2 per unit, then what is the least costly way of producing Zenias?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and B)
F) A) and C)

Question 18

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?E) A) and D)
F) A) and C)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following does not foster innovation and technological advance?

Accepted Answer

A)   Competition in markets
B)   Freedom of choice and enterprise
C)   Self-interest and personal rewards
D)   Fear and avoidance of riskE) None of the above
F) A) and B)

Exam 2: The Market System and the Circular Flow

In the circular flow model of the market system, business firms:

Correct Answer
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Specialization is beneficial:

Correct Answer
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The economy of the United States can best be described as laissez-faire capitalism.

Correct Answer
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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?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Maximum profits are what motivate consumers to decide who will get the goods and services in a market system.

Correct Answer
verified

Economic systems differ from one another based on who own the factors of production and:

Correct Answer
verified

In a market system, the distribution of goods and services among consumers is largely determined by:

Correct Answer
verified

Even if prices are fixed and competition is restricted by the government, the "invisible hand" will still work in the economy and lead to economic efficiency.

Correct Answer
verified

The market system is also known as:

Correct Answer
verified

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

Correct Answer
verified

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

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

Correct Answer
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Which of the following does not foster innovation and technological advance?

Correct Answer
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In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an "invisible hand," promoting the public interest.

Correct Answer
verified

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

Correct Answer
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International specialization and trade:

Correct Answer
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In a market system, which of the following will eliminate high-cost producers, and allow only the low-cost producers to survive?

Correct Answer
verified

If the total costs of producing 1,500 units of output is $15,000 and this output sold to consumers for a total of $16,500, then the firm would earn profits of:

Correct Answer
verified

Correct Answer
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Exam 2: The Market System and the Circular Flow

In the circular flow model of the market system, business firms:

Correct AnswerverifiedShow Answer

Specialization is beneficial:

Correct AnswerverifiedShow Answer

The economy of the United States can best be described as laissez-faire capitalism.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Maximum profits are what motivate consumers to decide who will get the goods and services in a market system.

Correct AnswerverifiedShow Answer

Economic systems differ from one another based on who own the factors of production and:

Correct AnswerverifiedShow Answer

In a market system, the distribution of goods and services among consumers is largely determined by:

Correct AnswerverifiedShow Answer

Even if prices are fixed and competition is restricted by the government, the "invisible hand" will still work in the economy and lead to economic efficiency.

Correct AnswerverifiedShow Answer

The market system is also known as:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following does not foster innovation and technological advance?

Correct AnswerverifiedShow Answer

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an "invisible hand," promoting the public interest.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

International specialization and trade:

Correct AnswerverifiedShow Answer

In a market system, which of the following will eliminate high-cost producers, and allow only the low-cost producers to survive?

Correct AnswerverifiedShow Answer

If the total costs of producing 1,500 units of output is $15,000 and this output sold to consumers for a total of $16,500, then the firm would earn profits of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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