Question 1

The use of money contributes to economic efficiency because

Accepted Answer

A) governmental direction of the production and distribution of output can be avoided by using money. 
B) roundabout production could not occur without the availability of money. 
C) it is necessary for the creation of capital goods. 
D) it promotes specialization by overcoming the problems with barter. 
A) governmental direction of the production and distribution of output can be avoided by using money. 
B) roundabout production could not occur without the availability of money. 
C) it is necessary for the creation of capital goods. 
D) it promotes specialization by overcoming the problems with barter.

Question 2

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." 
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."

Question 3

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 4

Command systems are also known as

Accepted Answer

A) market systems. 
B) pure capitalism. 
C) laissez-faire capitalism. 
D) communism. 
A) market systems. 
B) pure capitalism. 
C) laissez-faire capitalism. 
D) communism.

Question 5

In the circular flow model, households earn their incomes in the

Accepted Answer

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

Question 6

If economic profits in a particular industry increase, then we would expect

Accepted Answer

A) resources to be diverted away from that industry. 
B) firms in that industry to produce less output. 
C) firms to enter that industry, thus expanding it. 
D) consumers to buy less from that industry. 
A) resources to be diverted away from that industry. 
B) firms in that industry to produce less output. 
C) firms to enter that industry, thus expanding it. 
D) consumers to buy less from that industry.

Question 7

According to the circular flow model of the market system, when resource-owners' money income is rising, then the costs to business firms that employ their resources must be falling.

Accepted Answer

A) True 
 B)False

Question 8

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Accepted Answer

A) What will be produced? 
B) How will the output be produced? 
C) How will the system accommodate change? 
D) Who will get the output? 
A) What will be produced? 
B) How will the output be produced? 
C) How will the system accommodate change? 
D) Who will get the output?

Question 9

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; resources 
A) goods and services; consumption expenditures 
B) consumption expenditures; goods and services 
C) resources; money income 
D) money income; resources

Question 10

Freedom of enterprise

Accepted Answer

A) is a characteristic that is common to most economic systems. 
B) in a market system means that entrepreneurs can obtain and use economic resources without any legal restraint. 
C) allows businesses, within broad limits, to choose what goods to produce. 
D) refers primarily to the right of consumers to purchase what they want. 
A) is a characteristic that is common to most economic systems. 
B) in a market system means that entrepreneurs can obtain and use economic resources without any legal restraint. 
C) allows businesses, within broad limits, to choose what goods to produce. 
D) refers primarily to the right of consumers to purchase what they want.

Question 11

Bitcoin mining operations tend to maximize profits by

Accepted Answer

A) paying their labor minimum wage. 
B) using super computers. 
C) using low-cost electricity. 
D) operating in areas with little regulation. 
A) paying their labor minimum wage. 
B) using super computers. 
C) using low-cost electricity. 
D) operating in areas with little regulation.

Question 12

Which of the following is the main problem with the barter system of exchange?

Accepted Answer

A) It encourages self-interest. 
B) It fosters the division of labor. 
C) It requires a coincidence of wants. 
D) It undermines the right to bequeath. 
A) It encourages self-interest. 
B) It fosters the division of labor. 
C) It requires a coincidence of wants. 
D) It undermines the right to bequeath.

Question 13

Costs can be defined as total payments made to workers, landowners, and capital suppliers less payments to the entrepreneur for organizing and combining the other resources used to produce a good.

Accepted Answer

A) True 
 B)False

Question 14

The competitive market system

Accepted Answer

A) encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques. 
B) discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment. 
C) discourages innovation because firms want to get all the profits possible from existing machinery and equipment. 
D) encourages innovation because successful innovators are rewarded with economic profits. 
A) encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques. 
B) discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment. 
C) discourages innovation because firms want to get all the profits possible from existing machinery and equipment. 
D) encourages innovation because successful innovators are rewarded with economic profits.

Question 15

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 16

Which of the following statements about self-interest in a market system is false?

Accepted Answer

A) Self-interest usually motivates an individual to deliver something of value to others. 
B) Self-interest of entrepreneurs implies seeking maximum profits or minimum losses. 
C) Self-interest applies only to capitalists and entrepreneurs, not to workers employed by others. 
D) In a market system, consumers are just like firms: self-interest is what motivates them. 
A) Self-interest usually motivates an individual to deliver something of value to others. 
B) Self-interest of entrepreneurs implies seeking maximum profits or minimum losses. 
C) Self-interest applies only to capitalists and entrepreneurs, not to workers employed by others. 
D) In a market system, consumers are just like firms: self-interest is what motivates them.

Question 17

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 18

One basic problem faced by central planners, but hardly present in a market system, has to do with

Accepted Answer

A) determining the production goals or targets in a factory. 
B) having limited resources and trying to match them with unlimited wants. 
C) coordinating production in various industries so that bottlenecks do not develop. 
D) providing financial resources for increasing the real flows of products in the economy. 
A) determining the production goals or targets in a factory. 
B) having limited resources and trying to match them with unlimited wants. 
C) coordinating production in various industries so that bottlenecks do not develop. 
D) providing financial resources for increasing the real flows of products in the economy.

Question 19

Which of the following helps explain why the economy of Venezuela has collapsed?

Accepted Answer

A) increased oil production due to government nationalization of the industry 
B) government price controls that increase competition among small businesses 
C) a substantial crackdown on corruption caused many companies to be put out of business 
D) hyperinflation caused by printing money to pay for government spending 
A) increased oil production due to government nationalization of the industry 
B) government price controls that increase competition among small businesses 
C) a substantial crackdown on corruption caused many companies to be put out of business 
D) hyperinflation caused by printing money to pay for government spending

Question 20

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

Accepted Answer

A) True 
 B)False

Exam 2: The Market System and the Circular Flow

The use of money contributes to economic efficiency because

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

Today, South Korea's economy

Command systems are also known as

In the circular flow model, households earn their incomes in the

If economic profits in a particular industry increase, then we would expect

According to the circular flow model of the market system, when resource-owners' money income is rising, then the costs to business firms that employ their resources must be falling.

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

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 ___.

Freedom of enterprise

Bitcoin mining operations tend to maximize profits by

Which of the following is the main problem with the barter system of exchange?

Costs can be defined as total payments made to workers, landowners, and capital suppliers less payments to the entrepreneur for organizing and combining the other resources used to produce a good.

The competitive market system

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.

Which of the following statements about self-interest in a market system is false?

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

One basic problem faced by central planners, but hardly present in a market system, has to do with

Which of the following helps explain why the economy of Venezuela has collapsed?

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

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

Filters

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 _.