Question 1

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 2

International specialization and trade

Accepted Answer

A) must be done on a barter system. 
B) often requires the exchange of currencies. 
C) does not illustrate the division of labor. 
D) requires active government regulation. 
A) must be done on a barter system. 
B) often requires the exchange of currencies. 
C) does not illustrate the division of labor. 
D) requires active government regulation.

Question 3

Economic systems differ according to which two main characteristics?

Accepted Answer

A) who owns the factors of production and the methods used to coordinate economic activity 
B) the technology used in production and the quantity and quality of natural resources 
C) how goods are produced and who gets them 
D) the political system in place and the degree of scarcity facing the economy 
A) who owns the factors of production and the methods used to coordinate economic activity 
B) the technology used in production and the quantity and quality of natural resources 
C) how goods are produced and who gets them 
D) the political system in place and the degree of scarcity facing the economy

Question 4

Which of the following is one of the Five Fundamental Questions?

Accepted Answer

A) Which products should be subsidized? 
B) How will the goods and services be produced? 
C) How much should society save? 
D) Which products should be taxed? 
A) Which products should be subsidized? 
B) How will the goods and services be produced? 
C) How much should society save? 
D) Which products should be taxed?

Question 5

Property rights are important because they

Accepted Answer

A) ensure an equal distribution of income. 
B) encourage cooperation by improving the chances of mutually agreeable transactions. 
C) guarantee that any exchange will make all parties better off than prior to the exchange. 
D) allow the government to control how resources are allocated. 
A) ensure an equal distribution of income. 
B) encourage cooperation by improving the chances of mutually agreeable transactions. 
C) guarantee that any exchange will make all parties better off than prior to the exchange. 
D) allow the government to control how resources are allocated.

Question 6

The Bitcoin currency is issued by

Accepted Answer

A) the United States Federal Reserve. 
B) the United States Treasury. 
C) the World Bank. 
D) no government of any country. 
A) the United States Federal Reserve. 
B) the United States Treasury. 
C) the World Bank. 
D) no government of any country.

Question 7

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Accepted Answer

A) True 
 B)False

Question 8

The invisible hand refers to the

Accepted Answer

A) fact that the U.S. tax system redistributes income from rich to poor. 
B) notion that, under competition, decisions motivated by self-interest promote the social interest. 
C) tendency of monopolistic sellers to raise prices above competitive levels. 
D) fact that government controls the functioning of the market system. 
A) fact that the U.S. tax system redistributes income from rich to poor. 
B) notion that, under competition, decisions motivated by self-interest promote the social interest. 
C) tendency of monopolistic sellers to raise prices above competitive levels. 
D) fact that government controls the functioning of the market system.

Question 9

One major element of the command system is

Accepted Answer

A) an emphasis on private ownership of resources. 
B) individual decentralized decision making. 
C) reliance on supply-and-demand forces to guide economic activity. 
D) central planning conducted by the government. 
A) an emphasis on private ownership of resources. 
B) individual decentralized decision making. 
C) reliance on supply-and-demand forces to guide economic activity. 
D) central planning conducted by the government.

Question 10

Which of the following does not illustrate the idea of creative destruction?

Accepted Answer

A) Digital downloads have shrunk the market for CDs and DVDs. 
B) Online retail sales have increased, while brick-and-mortar sales have slowed down. 
C) The opening of a new mall reduces the traffic in another mall. 
D) A firm has to destroy some of the expired products in its inventory. 
A) Digital downloads have shrunk the market for CDs and DVDs. 
B) Online retail sales have increased, while brick-and-mortar sales have slowed down. 
C) The opening of a new mall reduces the traffic in another mall. 
D) A firm has to destroy some of the expired products in its inventory.

Question 11

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.

Question 12

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 13

The advent of Netflix movie streaming and Redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. This is an example of

Accepted Answer

A) creative destruction. 
B) derived demand. 
C) capital accumulation. 
D) the difference between normal and economic profits. 
A) creative destruction. 
B) derived demand. 
C) capital accumulation. 
D) the difference between normal and economic profits.

Question 14

Explain the main characteristics of a corporation.

Accepted Answer

A corporation is an independent legal en

Question 15

Money functions as a medium of exchange by eliminating the need for a coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following best describes the "invisible hand" concept?

Accepted Answer

A) Ample regulation of business by the government will maximize the public's best interests. 
B) The market system works best when resources are free to move from one use to another. 
C) The problem of scarcity can best be overcome in a system of mixed capitalism. 
D) Self-interest in a market system will automatically promote the public interest as well. 
A) Ample regulation of business by the government will maximize the public's best interests. 
B) The market system works best when resources are free to move from one use to another. 
C) The problem of scarcity can best be overcome in a system of mixed capitalism. 
D) Self-interest in a market system will automatically promote the public interest as well.

Question 17

Which of the following is not a major category of business structure?

Accepted Answer

A) sole proprietorship 
B) partnership 
C) public agency 
D) corporation 
A) sole proprietorship 
B) partnership 
C) public agency 
D) corporation

Question 18

The coordination problem in the centrally planned economies refers to the idea that

Accepted Answer

A) planners had to direct required inputs to each enterprise. 
B) the price level and the level of employment were inversely related. 
C) the immediate effect of more investment was less consumption. 
D) exports had to be equal to imports for a central plan to work. 
A) planners had to direct required inputs to each enterprise. 
B) the price level and the level of employment were inversely related. 
C) the immediate effect of more investment was less consumption. 
D) exports had to be equal to imports for a central plan to work.

Question 19

Today, Venezuela's economy is

Accepted Answer

A) thriving, thanks to Bolivarian Socialism. 
B) expanding due to the clever idea of printing money to pay the government's bills. 
C) considered a laissez-faire economic system. 
D) ruined due to actions of incompetent political leaders. 
A) thriving, thanks to Bolivarian Socialism. 
B) expanding due to the clever idea of printing money to pay the government's bills. 
C) considered a laissez-faire economic system. 
D) ruined due to actions of incompetent political leaders.

Question 20

Which of the following is not one of the five fundamental questions?

Accepted Answer

A) What prices will be charged for goods and services? 
B) Who will get the goods and services? 
C) What goods and services will be produced? 
D) How will the system promote progress? 
A) What prices will be charged for goods and services? 
B) Who will get the goods and services? 
C) What goods and services will be produced? 
D) How will the system promote progress?

Exam 2: The Market System and the Circular Flow

The French term "laissez-faire" means

International specialization and trade

Economic systems differ according to which two main characteristics?

Which of the following is one of the Five Fundamental Questions?

Property rights are important because they

The Bitcoin currency is issued by

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

The invisible hand refers to the

One major element of the command system is

Which of the following does not illustrate the idea of creative destruction?

In the simple circular flow model,

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

The advent of Netflix movie streaming and Redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. This is an example of

Explain the main characteristics of a corporation.

Money functions as a medium of exchange by eliminating the need for a coincidence of wants.

Which of the following best describes the "invisible hand" concept?

Which of the following is not a major category of business structure?

The coordination problem in the centrally planned economies refers to the idea that

Today, Venezuela's economy is

Which of the following is not one of the five fundamental questions?

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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