Question 1

The choice of the most efficient production technique is not affected by how much buyers want to buy the product.

Accepted Answer

A) True 
 B)False

Question 2

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the

Accepted Answer

A) incentive problem under central planning. 
B) coordination problem under central planning. 
C) self-sufficiency dilemma under communism. 
D) resource overcommitment problem under communism. 
A) incentive problem under central planning. 
B) coordination problem under central planning. 
C) self-sufficiency dilemma under communism. 
D) resource overcommitment problem under communism.

Question 3

Competition in a market system denotes a condition where

Accepted Answer

A) the diffusion of economic power limits its potential abuse. 
B) any given product can be purchased at a wide range of prices. 
C) contractual agreements among individual firms are restricted and avoided. 
D) a few large, dominant sellers are constantly jostling for market share. 
A) the diffusion of economic power limits its potential abuse. 
B) any given product can be purchased at a wide range of prices. 
C) contractual agreements among individual firms are restricted and avoided. 
D) a few large, dominant sellers are constantly jostling for market share.

Question 4

In a market system, as one industry expands while another contracts, resources will flow

Accepted Answer

A) away from the expanding industry toward the contracting one. 
B) across industries, driven by the changes in resource prices paid by firms. 
C) toward the industry where the product demand is declining. 
D) because resource allocation will have to equalize between the two industries. 
A) away from the expanding industry toward the contracting one. 
B) across industries, driven by the changes in resource prices paid by firms. 
C) toward the industry where the product demand is declining. 
D) because resource allocation will have to equalize between the two industries.

Question 5

A market system is characterized by the private ownership of resources and the use of prices to coordinate economic activity.

Accepted Answer

A) True 
 B)False

Question 6

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

Accepted Answer

A) incentive problem under central planning. 
B) self-sufficiency dilemma under communism. 
C) resource overcommitment problem under communism. 
D) coordination problem under central planning. 
A) incentive problem under central planning. 
B) self-sufficiency dilemma under communism. 
C) resource overcommitment problem under communism. 
D) coordination problem under central planning.

Question 7

The invisible hand concept suggests that

Accepted Answer

A) market failures imply the need for a national economic plan. 
B) big businesses are inherently more efficient than small businesses. 
C) the competitiveness of a capitalistic market economy invariably diminishes over time. 
D) assuming competition, private and public interests will coincide. 
A) market failures imply the need for a national economic plan. 
B) big businesses are inherently more efficient than small businesses. 
C) the competitiveness of a capitalistic market economy invariably diminishes over time. 
D) assuming competition, private and public interests will coincide.

Question 8

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as

Accepted Answer

A) consumer sovereignty. 
B) the invisible hand. 
C) derived demand. 
D) creative destruction. 
A) consumer sovereignty. 
B) the invisible hand. 
C) derived demand. 
D) creative destruction.

Question 9

Which of the following is not a typical characteristic of a market system?

Accepted Answer

A) freedom of choice 
B) competition in product and resource markets 
C) consumer sovereignty 
D) lack of incentives to produce new products 
E) profit as a success indicator 
A) freedom of choice 
B) competition in product and resource markets 
C) consumer sovereignty 
D) lack of incentives to produce new products 
E) profit as a success indicator

Question 10

The presence of market failures implies that

Accepted Answer

A) money is not an effective tool for exchange in a market system. 
B) there is an active role for government, even in a market system. 
C) individuals and firms should strive to be self-sufficient rather than specialize. 
D) command systems are superior to market systems in the allocation of resources. 
A) money is not an effective tool for exchange in a market system. 
B) there is an active role for government, even in a market system. 
C) individuals and firms should strive to be self-sufficient rather than specialize. 
D) command systems are superior to market systems in the allocation of resources.

Question 11

If competitive industry Y is incurring substantial losses, output will

Accepted Answer

A) expand as resources move toward industry Y. 
B) contract as resources move toward industry Y. 
C) contract as resources move away from industry Y. 
D) expand as resources move away from industry Y. 
A) expand as resources move toward industry Y. 
B) contract as resources move toward industry Y. 
C) contract as resources move away from industry Y. 
D) expand as resources move away from industry Y.

Question 12

In a market system, more resources will move toward an industry and expand its production if the industry has

Accepted Answer

A) positive revenues. 
B) positive costs. 
C) TC  TR. 
A) positive revenues. 
B) positive costs. 
C) TC  TR.

Question 13

In the resource market,

Accepted Answer

A) businesses borrow financial capital from households. 
B) businesses sell services to households. 
C) households sell resources to businesses. 
D) firms sell raw materials to households. 
A) businesses borrow financial capital from households. 
B) businesses sell services to households. 
C) households sell resources to businesses. 
D) firms sell raw materials to households.

Question 14

All of the following statements describe a market economy except

Accepted Answer

A) government prescribes the market prices for goods and services. 
B) prices provide important signals to buyers and sellers. 
C) the allocation of resources is determined by their prices. 
D) the actions of buyers and sellers establish a product's price. 
A) government prescribes the market prices for goods and services. 
B) prices provide important signals to buyers and sellers. 
C) the allocation of resources is determined by their prices. 
D) the actions of buyers and sellers establish a product's price.

Question 15

In a market system, the distribution of goods and services among consumers is largely determined by

Accepted Answer

A) the willingness and ability of consumers to pay the prices. 
B) whoever needs the goods and services the most. 
C) whoever has the closest connection to firms and the government. 
D) a random factor that is almost impossible to predict. 
A) the willingness and ability of consumers to pay the prices. 
B) whoever needs the goods and services the most. 
C) whoever has the closest connection to firms and the government. 
D) a random factor that is almost impossible to predict.

Question 16

Which of the following would not be emphasized in a capitalist economy?

Accepted Answer

A) private ownership of capital and other resources 
B) competition and decentralized decisions regarding production and consumption 
C) reliance on market forces to coordinate economic activity 
D) prevention of firms from exposing themselves to financial risk 
A) private ownership of capital and other resources 
B) competition and decentralized decisions regarding production and consumption 
C) reliance on market forces to coordinate economic activity 
D) prevention of firms from exposing themselves to financial risk

Question 17

The main mechanism that regulates the market system is

Accepted Answer

A) self-interest. 
B) private property. 
C) competition. 
D) freedom of enterprise and choice. 
A) self-interest. 
B) private property. 
C) competition. 
D) freedom of enterprise and choice.

Question 18

Refer to the provided figure. If box A represents households, B the product market, and C businesses, then flow (2)and flow (4)would represent

Accepted Answer

A) the flow of labor and other resources. 
B) the flow of goods and services. 
C) business spending revenues. 
D) money incomes and consumer spending. 
A) the flow of labor and other resources. 
B) the flow of goods and services. 
C) business spending revenues. 
D) money incomes and consumer spending.

Question 19

In a market economy, a significant change in consumers' desire for product X will

Accepted Answer

A) alter the profits or losses received by suppliers of product X. 
B) cause a reallocation of scarce resources. 
C) cause some industries to expand and others to contract. 
D) do all the things mentioned in the other answers. 
A) alter the profits or losses received by suppliers of product X. 
B) cause a reallocation of scarce resources. 
C) cause some industries to expand and others to contract. 
D) do all the things mentioned in the other answers.

Question 20

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.

Accepted Answer

A) product; financial 
B) resource; product 
C) product; resource 
D) capital; product 
A) product; financial 
B) resource; product 
C) product; resource 
D) capital; product

Exam 2: The Market System and the Circular Flow

The choice of the most efficient production technique is not affected by how much buyers want to buy the product.

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the

Competition in a market system denotes a condition where

In a market system, as one industry expands while another contracts, resources will flow

A market system is characterized by the private ownership of resources and the use of prices to coordinate economic activity.

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

The invisible hand concept suggests that

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as

Which of the following is not a typical characteristic of a market system?

The presence of market failures implies that

If competitive industry Y is incurring substantial losses, output will

In a market system, more resources will move toward an industry and expand its production if the industry has

In the resource market,

All of the following statements describe a market economy except

In a market system, the distribution of goods and services among consumers is largely determined by

Which of the following would not be emphasized in a capitalist economy?

The main mechanism that regulates the market system is

Refer to the provided figure. If box A represents households, B the product market, and C businesses, then flow (2)and flow (4)would represent

In a market economy, a significant change in consumers' desire for product X will

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.

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

In terms of the circular flow diagram, households make expenditures in the _ market and receive income through the _ market.