Question 1

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because

Accepted Answer

A) production targets were often increased when innovation occurred. 
B) there was a chronic shortage of computers. 
C) workers could not be reallocated geographically. 
D) innovations ordinarily increased dependence on world markets. 
A) production targets were often increased when innovation occurred. 
B) there was a chronic shortage of computers. 
C) workers could not be reallocated geographically. 
D) innovations ordinarily increased dependence on world markets. A

Question 2

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  False

Question 3

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

Accepted Answer

A) the laissez-faire economy 
B) pure capitalism 
C) a mixed-market economy 
D) macroeconomic systems 
A) the laissez-faire economy 
B) pure capitalism 
C) a mixed-market economy 
D) macroeconomic systems C

Question 4

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Accepted Answer

A) It encourages more people to become entrepreneurs. 
B) Firms have to pay more to attract inputs, as these inputs have to share the risk. 
C) Firms focus attention on prudent risk management, as it is profitable to manage risk. 
D) Income becomes more equally distributed. 
A) It encourages more people to become entrepreneurs. 
B) Firms have to pay more to attract inputs, as these inputs have to share the risk. 
C) Firms focus attention on prudent risk management, as it is profitable to manage risk. 
D) Income becomes more equally distributed.

Question 5

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

Accepted Answer

A) "Through government leadership and direction." 
B) "Through the guiding function of prices and the incentive function of profits." 
C) "Through training and retraining programs." 
D) "Through trial and error." 
A) "Through government leadership and direction." 
B) "Through the guiding function of prices and the incentive function of profits." 
C) "Through training and retraining programs." 
D) "Through trial and error."

Question 6

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 7

If products were in short or surplus supply in the Soviet Union,

Accepted Answer

A) price and profit signals eliminated those shortages and surpluses. 
B) price and profit signals intensified those shortages and surpluses. 
C) producers would not react because no price or profit signals occurred. 
D) the planners would immediately adjust production to achieve equilibrium. 
A) price and profit signals eliminated those shortages and surpluses. 
B) price and profit signals intensified those shortages and surpluses. 
C) producers would not react because no price or profit signals occurred. 
D) the planners would immediately adjust production to achieve equilibrium.

Question 8

What are the two main problems that have caused the demise of the command systems?

Accepted Answer

The first difficulty was the coordinatio

Question 9

Firms are motivated to minimize production costs because

Accepted Answer

A) it is the most environmentally friendly way to produce goods. 
B) least-cost production techniques use the smallest total quantity of resources. 
C) competitive pressures in the market will drive out higher-cost producers. 
D) the government provides tax credits and subsidies to low-cost producers. 
A) it is the most environmentally friendly way to produce goods. 
B) least-cost production techniques use the smallest total quantity of resources. 
C) competitive pressures in the market will drive out higher-cost producers. 
D) the government provides tax credits and subsidies to low-cost producers.

Question 10

A production system where various workers concentrate on different specialized tasks to contribute toward a whole product is referred to as

Accepted Answer

A) a coincidence of wants. 
B) roundabout production. 
C) freedom of enterprise. 
D) division of labor. 
A) a coincidence of wants. 
B) roundabout production. 
C) freedom of enterprise. 
D) division of labor.

Question 11

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 12

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 13

In a market system, employees and suppliers

Accepted Answer

A) are usually shielded from risk, but at the cost of not sharing in the profits of the firm. 
B) are usually shielded from risk and share in the profits of the firm. 
C) are generally subject to as much risk as firm owners but get to share in the profits. 
D) bear as much risk as firm owners but don't get to share in the profits. 
A) are usually shielded from risk, but at the cost of not sharing in the profits of the firm. 
B) are usually shielded from risk and share in the profits of the firm. 
C) are generally subject to as much risk as firm owners but get to share in the profits. 
D) bear as much risk as firm owners but don't get to share in the profits.

Question 14

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

Accepted Answer

A) True 
 B)False

Question 15

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity.   If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land, 3 of labor, 1 of capital, and 2 of entrepreneurial ability, this technique would

Accepted Answer

A) not be adopted because, although it reduces production costs, it does not increase profit. 
B) be adopted because it would lower production costs and increase economic profit. 
C) not be adopted because it entails higher production costs than other available techniques. 
D) be adopted, even though economic profits would be reduced slightly. 
A) not be adopted because, although it reduces production costs, it does not increase profit. 
B) be adopted because it would lower production costs and increase economic profit. 
C) not be adopted because it entails higher production costs than other available techniques. 
D) be adopted, even though economic profits would be reduced slightly.

Question 16

The two basic markets shown by the simple circular flow model are

Accepted Answer

A) capital goods and consumer goods. 
B) competitive and regulated. 
C) product and resource. 
D) household and business. 
A) capital goods and consumer goods. 
B) competitive and regulated. 
C) product and resource. 
D) household and business.

Question 17

On the basis of the information, and assuming trade occurs between the three states, we can expect

Accepted Answer

A) Washington to exchange apples with Texas and receive money in return. 
B) Washington to exchange apples with Michigan and receive money in return. 
C) Texas to exchange lettuce with Michigan and receive autos in return. 
D) Texas to trade lettuce directly for Washington apples. 
A) Washington to exchange apples with Texas and receive money in return. 
B) Washington to exchange apples with Michigan and receive money in return. 
C) Texas to exchange lettuce with Michigan and receive autos in return. 
D) Texas to trade lettuce directly for Washington apples.

Question 18

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

Accepted Answer

Human specialization makes use of differ

Question 19

List nine characteristics of the market system.

Accepted Answer

The nine key features are: (1)private pr

Question 20

Answer the question based on the following information: Suppose 10 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively.   If the price of product A is $1.00, and the firm is producing efficiently the firm will realize

Accepted Answer

A) Economic profit of $10. 
B) Economic profit of $23. 
C) Economic loss of $13. 
D) Economic loss of $3. 
E) Economic profit of $3. 
A) Economic profit of $10. 
B) Economic profit of $23. 
C) Economic loss of $13. 
D) Economic loss of $3. 
E) Economic profit of $3.

Exam 2: The Market System and the Circular Flow

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because

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.

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

Refer to the diagram. Flow 4 represents

If products were in short or surplus supply in the Soviet Union,

What are the two main problems that have caused the demise of the command systems?

Firms are motivated to minimize production costs because

A production system where various workers concentrate on different specialized tasks to contribute toward a whole product is referred to as

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

The "invisible hand" concept refers to the

In a market system, employees and suppliers

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

The two basic markets shown by the simple circular flow model are

On the basis of the information, and assuming trade occurs between the three states, we can expect

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

List nine characteristics of the market system.

Limits, Alternatives, and Choices

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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