Question 1

Refer to the diagram. Flow 4 represents

Accepted Answer

A)  wage, rent, interest, and proﬁt income. 
B)  land, labor, capital, and entrepreneurial ability. 
C)  goods and services. 
D)  consumer expenditures and business revenue. 
A)  wage, rent, interest, and proﬁt income. 
B)  land, labor, capital, and entrepreneurial ability. 
C)  goods and services. 
D)  consumer expenditures and business revenue.

Question 2

Refer to the diagram. Arrows (3) and (4) represent

Accepted Answer

A)  goods and services, respectively. 
B)  incomes and consumer expenditures, respectively. 
C)  resources and goods, respectively. 
D)  consumer expenditures and income, respectively. 
A)  goods and services, respectively. 
B)  incomes and consumer expenditures, respectively. 
C)  resources and goods, respectively. 
D)  consumer expenditures and income, respectively.

Question 3

The French term "laissez-faire" means

Accepted Answer

A)  "there is no free lunch." 
B)  "let it be." 
C)  "circular ﬂow." 
D)  "public ownership." 
A)  "there is no free lunch." 
B)  "let it be." 
C)  "circular ﬂow." 
D)  "public ownership."

Question 4

Economic proﬁts in an industry suggest the industry

Accepted Answer

A)  can earn more proﬁts by increasing product price. 
B)  should be larger to better satisfy consumers' desire for the product. 
C)  has excess production capacity. 
D)  is the size that consumers want it to be. 
A)  can earn more proﬁts by increasing product price. 
B)  should be larger to better satisfy consumers' desire for the product. 
C)  has excess production capacity. 
D)  is the size that consumers want it to be.

Question 5

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. 
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.

Question 6

(Consider This) South Korea has always been more prosperous than North Korea, even before 1953.

Accepted Answer

A) True 
 B)False

Question 7

Specialization-the division of labor-enhances productivity and eﬃciency by

Accepted Answer

A)  allowing workers to take advantage of existing differences in their abilities and skills. 
B)  avoiding the time loss involved in shifting from one production task to another. 
C)  allowing workers to develop skills by working on one, or a limited number, of tasks. 
D)  all of the means identiﬁed in the other answers. 
A)  allowing workers to take advantage of existing differences in their abilities and skills. 
B)  avoiding the time loss involved in shifting from one production task to another. 
C)  allowing workers to develop skills by working on one, or a limited number, of tasks. 
D)  all of the means identiﬁed in the other answers.

Question 8

(Consider This) Today, South Korea's economy

Accepted Answer

A)  produces a GDP per capita of $1,700. 
B)  is considered a command economy. 
C)  has a lower GDP per capita than North Korea's economy. 
D)  is more developed and prosperous, producing an average annual income of $39,500. 
A)  produces a GDP per capita of $1,700. 
B)  is considered a command economy. 
C)  has a lower GDP per capita than North Korea's economy. 
D)  is more developed and prosperous, producing an average annual income of $39,500.

Question 9

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the

Accepted Answer

A)  guiding function of prices. 
B)  monetary function of prices. 
C)  circular ﬂow of income. 
D)  market determination of prices. 
A)  guiding function of prices. 
B)  monetary function of prices. 
C)  circular ﬂow of income. 
D)  market determination of prices.

Question 10

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.
  If the price per unit of labor were to increase from $2 to $3, the most eﬃcient production technique
Would then be

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 11

Examples of command economies are

Accepted Answer

A)  the United States and Japan. 
B)  Sweden and Norway. 
C)  Mexico and Brazil. 
D)  Cuba and North Korea. 
A)  the United States and Japan. 
B)  Sweden and Norway. 
C)  Mexico and Brazil. 
D)  Cuba and North Korea.

Question 12

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.
  Using technique A will result in an

Accepted Answer

A)  economic loss of $2. 
B)  economic proﬁt of $1. 
C)  economic proﬁt of $2. 
D)  economic proﬁt of $3. 
A)  economic loss of $2. 
B)  economic proﬁt of $1. 
C)  economic proﬁt of $2. 
D)  economic proﬁt of $3.

Question 13

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. 
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.

Question 14

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 15

The market system is also known as ___, while the command system is also known as _____.

Accepted Answer

A)  capitalism; socialism 
B)  socialism; communism 
C)  central planning; laissez faire 
D)  a production system; a planning system 
A)  capitalism; socialism 
B)  socialism; communism 
C)  central planning; laissez faire 
D)  a production system; a planning system

Question 16

Describe three ways that human specialization contributes to society's output.

Accepted Answer

Human specialization makes use of differ

Question 17

The "coincidence of wants" problem associated with barter refers to the fact that

Accepted Answer

A)  for exchange to occur, each seller must have a product that some buyer wants. 
B)  money must be used as a medium of exchange or trade will never occur. 
C)  specialization is restricted by the size or scope of a market. 
D)  buyers in resource markets and sellers in product markets can never engage in exchange. 
A)  for exchange to occur, each seller must have a product that some buyer wants. 
B)  money must be used as a medium of exchange or trade will never occur. 
C)  specialization is restricted by the size or scope of a market. 
D)  buyers in resource markets and sellers in product markets can never engage in exchange.

Question 18

Refer to the diagram. Arrows (1) and (3) are associated with

Accepted Answer

A)  the money market. 
B)  the resource market. 
C)  the product market. 
D)  international trade. 
A)  the money market. 
B)  the resource market. 
C)  the product market. 
D)  international trade.

Question 19

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and
pass it on to the insurance company.

Accepted Answer

A) True 
 B)False

Question 20

On the basis of the information, it can be said that

Accepted Answer

A)  no coincidence of wants exists between any two states. 
B)  a coincidence of wants exists between Michigan and Washington. 
C)  a coincidence of wants exists between Texas and Washington. 
D)  a coincidence of wants exists between Michigan and Texas. 
A)  no coincidence of wants exists between any two states. 
B)  a coincidence of wants exists between Michigan and Washington. 
C)  a coincidence of wants exists between Texas and Washington. 
D)  a coincidence of wants exists between Michigan and Texas.

Exam 2: The Market System and the Circular Flow

Refer to the diagram. Flow 4 represents

Refer to the diagram. Arrows (3) and (4) represent

The French term "laissez-faire" means

Economic proﬁts in an industry suggest the industry

The invisible hand promotes society's interests because

(Consider This) South Korea has always been more prosperous than North Korea, even before 1953.

Specialization-the division of labor-enhances productivity and eﬃciency by

(Consider This) Today, South Korea's economy

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. If the price per unit of labor were to increase from $2 to $3, the most eﬃcient production technique Would then be

Examples of command economies are

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. Using technique A will result in an

The economies of North Korea and Cuba are

Specialization in production is economically beneﬁcial primarily because it

The market system is also known as ___, while the command system is also known as _____.

Describe three ways that human specialization contributes to society's output.

The "coincidence of wants" problem associated with barter refers to the fact that

Refer to the diagram. Arrows (1) and (3) are associated with

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

On the basis of the information, it can be said that

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

The market system is also known as _, while the command system is also known as ___.