Question 1

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.E) A) and D)
F) B) and C)

Question 2

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.E) None of the above
F) A) and B)

Question 3

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.E) B) and C)
F) A) and D)

Question 4

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."E) C) and D)
F) All of the above

Question 5

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.E) A) and D)
F) All of the above

Question 6

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.E) All of the above
F) None of the above

Question 7

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?E) A) and C)
F) A) and B)

Question 8

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.E) B) and C)
F) A) and C)

Question 9

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.E) None of the above
F) A) and B)

Question 10

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.E) A) and B)
F) All of the above

Question 11

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) All of the above
F) A) and C)

Question 12

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.E) C) and D)
F) All of the above

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; resourcesE) A) and B)
F) B) and C)

Question 14

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 moneyE) A) and B)
F) None of the above

Question 15

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.E) None of the above
F) A) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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.E) A) and B)
F) B) and C)

Question 18

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 answersE) B) and D)
F) None of the above

Question 19

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 20

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.E) B) and C)
F) A) and C)

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?

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The economies of North Korea and Cuba are

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In the resource market,

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The main mechanism that regulates the market system is

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

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

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

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

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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.

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

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

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The invisible hand promotes society's interests because

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

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

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

Correct AnswerverifiedShow Answer

Property rights are important because they

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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 _.

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

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

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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

Correct AnswerverifiedShow Answer

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