Question 1

In a market system, if firms in an industry persistently earn total revenues that are less than total costs, then that industry will

Accepted Answer

A) have some firms go out of business. 
B) attract more resources toward it. 
C) experience entry of new firms. 
D) get government protection from failure. 
A) have some firms go out of business. 
B) attract more resources toward it. 
C) experience entry of new firms. 
D) get government protection from failure.

Question 2

Why might a company use barter rather than money to make a trade?

Accepted Answer

A) Barter trade is generally more efficient than money-based trade. 
B) Barter can enable two firms to trade when their cash flows are limited. 
C) Money requires a coincidence of wants; barter is more direct. 
D) Money is efficient only for large transactions, so barter is preferred for smaller transactions. 
A) Barter trade is generally more efficient than money-based trade. 
B) Barter can enable two firms to trade when their cash flows are limited. 
C) Money requires a coincidence of wants; barter is more direct. 
D) Money is efficient only for large transactions, so barter is preferred for smaller transactions.

Question 3

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 4

"Creative destruction" in a market system is brought about by

Accepted Answer

A) entrepreneurship. 
B) striking workers. 
C) regulation by the government. 
D) money-based trade. 
A) entrepreneurship. 
B) striking workers. 
C) regulation by the government. 
D) money-based trade.

Question 5

In a market system, entrepreneurs start businesses in order to earn a high salary.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following would be primarily determined in the resource markets?

Accepted Answer

A) the airfares charged by airlines for family vacations 
B) the wage rates for computer programmers and engineers 
C) the number of home-Internet connections installed 
D) the amount of money in circulation issued by the government 
A) the airfares charged by airlines for family vacations 
B) the wage rates for computer programmers and engineers 
C) the number of home-Internet connections installed 
D) the amount of money in circulation issued by the government

Question 7

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. 
A) a capitalist economy. 
B) exchange and trade. 
C) the use of money. 
D) a central plan.

Question 8

In a command system,

Accepted Answer

A) self-interest motivates and commands each business firm's decisions and actions. 
B) the head of each family decides and commands what to do with the family's resources. 
C) a government-appointed planning board makes production and allocation decisions. 
D) market traders command what outputs are produced and how they are allocated. 
A) self-interest motivates and commands each business firm's decisions and actions. 
B) the head of each family decides and commands what to do with the family's resources. 
C) a government-appointed planning board makes production and allocation decisions. 
D) market traders command what outputs are produced and how they are allocated.

Question 9

The government may not implement policies intended to redistribute income in which of the following economic systems?

Accepted Answer

A) laissez-faire capitalism 
B) command systems 
C) a mixed economy 
D) the market system 
A) laissez-faire capitalism 
B) command systems 
C) a mixed economy 
D) the market system

Question 10

The money income of households consists of all the following, except

Accepted Answer

A) wages. 
B) profits. 
C) interest. 
D) revenues. 
A) wages. 
B) profits. 
C) interest. 
D) revenues.

Question 11

Refer to the diagram. Flow 2 represents

Accepted Answer

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

Question 12

Which is an example of barter?

Accepted Answer

A) a person trades a desk for a box of tools 
B) a person buys clothes at a used clothing store 
C) a gift of tuition money from parents to their children 
D) the purchase of stock on the New York Stock Exchange 
A) a person trades a desk for a box of tools 
B) a person buys clothes at a used clothing store 
C) a gift of tuition money from parents to their children 
D) the purchase of stock on the New York Stock Exchange

Question 13

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 14

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 the businesses listed in the other answers 
A) partnerships 
B) corporations 
C) sole proprietorships 
D) in all the businesses listed in the other answers

Question 15

What is the relationship between businesses and households in the circular flow diagram?

Accepted Answer

Households buy the goods and services th

Question 16

Explain the term "laissez faire capitalism."

Accepted Answer

This is a hypothetical economic system i

Question 17

The Heritage Foundation in 2018 ranked which of the following economies to have the highest economic freedom?

Accepted Answer

A) the United States 
B) Germany 
C) Japan 
D) Hong Kong 
A) the United States 
B) Germany 
C) Japan 
D) Hong Kong

Question 18

In analyzing a market system, economists often assume that firms will choose the production techniques that will give them maximum revenues.

Accepted Answer

A) True 
 B)False

Question 19

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) specialization 
A) competition 
B) money 
C) a sovereign government 
D) specialization

Question 20

Innovation lagged in the centrally planned economies because

Accepted Answer

A) there was too much domestic business competition. 
B) there was too much competition from foreign firms. 
C) enterprises resisted innovation in fear that their production targets would be raised. 
D) exports had to equal imports for the plan to work. 
A) there was too much domestic business competition. 
B) there was too much competition from foreign firms. 
C) enterprises resisted innovation in fear that their production targets would be raised. 
D) exports had to equal imports for the plan to work.

Exam 2: The Market System and the Circular Flow

In a market system, if firms in an industry persistently earn total revenues that are less than total costs, then that industry will

Why might a company use barter rather than money to make a trade?

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.

"Creative destruction" in a market system is brought about by

In a market system, entrepreneurs start businesses in order to earn a high salary.

Which of the following would be primarily determined in the resource markets?

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

In a command system,

The government may not implement policies intended to redistribute income in which of the following economic systems?

The money income of households consists of all the following, except

Refer to the diagram. Flow 2 represents

Which is an example of barter?

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

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

What is the relationship between businesses and households in the circular flow diagram?

Explain the term "laissez faire capitalism."

The Heritage Foundation in 2018 ranked which of the following economies to have the highest economic freedom?

In analyzing a market system, economists often assume that firms will choose the production techniques that will give them maximum revenues.

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

Innovation lagged in the centrally planned economies because

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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