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

Why is the right of private property an essential characteristic of a market system?

Accepted Answer

This right of private property, along wi

Question 3

Suppose a ?rm 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 ?rm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship
At $9 per unit.
$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Techniques $
$\begin{array} { | l | c | c | c | c | } 
\hline & A & B & C & D \
\hline \text { Labor } & 4 & 10 & 6 & 5 \
\hline \text { Land } & 5 & 3 & 3 & 3 \
\hline \text { Capital } & 5 & 2 & 4 & 4 \
\hline \text { Entrepreneurship } & 1 & 1 & 1 & 1 \
\hline
\end{array}$ Refer to the provided table, and suppose that the ?rm uses production technique D. If each of the 70
Units of Zenia that are produced sells for $1 apiece, then how much will be the total pro?ts of the ?rm
From 70 units of Zenia?

Accepted Answer

A)  $70 
B)  $57 
C)  $13 
D)  $83 
A)  $70 
B)  $57 
C)  $13 
D)  $83

Question 4

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 5

Discuss the beneﬁts of restricting business risk to the owners.

Accepted Answer

Many people deeply dislike risk and woul

Question 6

Government bailouts of failing businesses, like banks during the 2008 ﬁnancial crisis, will tend to reduce
the motivation among entrepreneurs to make prudent decisions in dealing with business risk.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

Explain the importance of self-interest in the operation of a market system.

Accepted Answer

Self-interest is important because it is

Question 9

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

Accepted Answer

A)  the quantity or volume of production. 
B)  product quality and variety. 
C)  the amount of proﬁts a producer makes. 
D)  morale of workers in a ﬁrm. 
A)  the quantity or volume of production. 
B)  product quality and variety. 
C)  the amount of proﬁts a producer makes. 
D)  morale of workers in a ﬁrm.

Question 10

The "invisible hand" concept refers to the

Accepted Answer

A)  guiding function of prices in a market system. 
B)  implicit inﬂuence that the government has on the actions of ﬁrms. 
C)  regulatory structure that markets must operate in. 
D)  underlying money ﬂows that promote the trading of goods and services. 
A)  guiding function of prices in a market system. 
B)  implicit inﬂuence that the government has on the actions of ﬁrms. 
C)  regulatory structure that markets must operate in. 
D)  underlying money ﬂows that promote the trading of goods and services.

Question 11

The presence of market failures implies that

Accepted Answer

A)  money is not an effective tool for exchange in a market system. 
B)  there is an active role for government, even in a market system. 
C)  individuals and ﬁrms should strive to be self-suﬃcient rather than specialize. 
D)  command systems are superior to market systems in the allocation of resources. 
A)  money is not an effective tool for exchange in a market system. 
B)  there is an active role for government, even in a market system. 
C)  individuals and ﬁrms should strive to be self-suﬃcient rather than specialize. 
D)  command systems are superior to market systems in the allocation of resources.

Question 12

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 13

Barter

Accepted Answer

A)  is the major means of exchange in centrally planned economies. 
B)  accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy. 
C)  entails the exchange of goods for goods. 
D)  is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers. 
A)  is the major means of exchange in centrally planned economies. 
B)  accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy. 
C)  entails the exchange of goods for goods. 
D)  is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers.

Question 14

What role does freedom play in capitalism? How important is it to the operation of a competitive market
economy?

Accepted Answer

Within legal limitations, freedom of ent

Question 15

Payments that a ﬁrm makes to obtain needed resources comprise its

Accepted Answer

A)  costs. 
B)  proﬁts. 
C)  capital. 
D)  revenues. 
A)  costs. 
B)  proﬁts. 
C)  capital. 
D)  revenues.

Question 16

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. 
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.

Question 17

What conditions are necessary for economic competition to exist?

Accepted Answer

Broadly deﬁned, competition requires two

Question 18

The simple circular ﬂow model shows that workers and capital owners offer their services to ﬁrms through the

Accepted Answer

A)  product markets. 
B)  resource markets. 
C)  money markets. 
D)  ﬁnancial markets. 
A)  product markets. 
B)  resource markets. 
C)  money markets. 
D)  ﬁnancial markets.

Question 19

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 predict. 
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 predict.

Question 20

In the simple circular ﬂow model,

Accepted Answer

A)  households are buyers of resources. 
B)  businesses are sellers of ﬁnal products. 
C)  households are sellers of ﬁnal products. 
D)  there are real ﬂows of goods, services, and resources, but not money ﬂows. 
A)  households are buyers of resources. 
B)  businesses are sellers of ﬁnal products. 
C)  households are sellers of ﬁnal products. 
D)  there are real ﬂows of goods, services, and resources, but not money ﬂows.

The division of labor means that

Why is the right of private property an essential characteristic of a market system?

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

Discuss the beneﬁts of restricting business risk to the owners.

Government bailouts of failing businesses, like banks during the 2008 ﬁnancial crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions in dealing with business risk.

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.

Explain the importance of self-interest in the operation of a market system.

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

The "invisible hand" concept refers to the

The presence of market failures implies that

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.

Barter

What role does freedom play in capitalism? How important is it to the operation of a competitive market economy?

Payments that a ﬁrm makes to obtain needed resources comprise its

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

What conditions are necessary for economic competition to exist?

The simple circular ﬂow model shows that workers and capital owners offer their services to ﬁrms through the

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

In the simple circular ﬂow model,

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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Exam 2: The Market System and the Circular Flow

The division of labor means that

Why is the right of private property an essential characteristic of a market system?

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

Discuss the beneﬁts of restricting business risk to the owners.

Government bailouts of failing businesses, like banks during the 2008 ﬁnancial crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions in dealing with business risk.

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.

Explain the importance of self-interest in the operation of a market system.

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

The "invisible hand" concept refers to the

The presence of market failures implies that

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.

Barter

What role does freedom play in capitalism? How important is it to the operation of a competitive market economy?

Payments that a ﬁrm makes to obtain needed resources comprise its

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

What conditions are necessary for economic competition to exist?

The simple circular ﬂow model shows that workers and capital owners offer their services to ﬁrms through the

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

In the simple circular ﬂow model,

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters