Question 1

- Refer to the above figure. If box D represents the product market and flow (6) represents consumption expenditures, then box C is:

Accepted Answer

A)  households, flow (7) is revenue, and flow (8) is goods and services. 
B)  businesses, flow (7) is revenue, and flow (8) is goods and services. 
C)  households, flow (7) is goods and services, and flow (8) is revenue. 
D)  businesses, flow (7) is goods and services, and flow (8) is revenue. 
A)  households, flow (7) is revenue, and flow (8) is goods and services. 
B)  businesses, flow (7) is revenue, and flow (8) is goods and services. 
C)  households, flow (7) is goods and services, and flow (8) is revenue. 
D)  businesses, flow (7) is goods and services, and flow (8) is revenue. C

Question 2

Based on the Index of Economic Freedom provided by the Heritage Foundation, which of the following nations is considered least free?

Accepted Answer

A)  New Zealand. 
B)  Colombia. 
C)  Argentina. 
D)  Japan. 
A)  New Zealand. 
B)  Colombia. 
C)  Argentina. 
D)  Japan. C

Question 3

Which of the following statements best describes production outcomes in the Soviet Union and pre-reform China?

Accepted Answer

A)  Output was often low quality because production managers were rewarded only for meeting quantitative production targets. 
B)  Output was often high quality but insufficient in quantity because production managers were rewarded only for meeting quality standards. 
C)  Output was generally high quality and sufficient in quantity because of the well-specified economic plans. 
D)  Output was of variable quality but sufficient in quantity because market signals were only consistent in telling managers how much to produce. 
A)  Output was often low quality because production managers were rewarded only for meeting quantitative production targets. 
B)  Output was often high quality but insufficient in quantity because production managers were rewarded only for meeting quality standards. 
C)  Output was generally high quality and sufficient in quantity because of the well-specified economic plans. 
D)  Output was of variable quality but sufficient in quantity because market signals were only consistent in telling managers how much to produce. A

Question 4

Which of the following statements is most accurate about the economies of North Korea and South Korea?

Accepted Answer

A)  The economies of both North Korea and South Korea have grown at approximately the same rate since Korea was divided after World War II. 
B)  Since their division after World War II, South Korea has grown much faster than North Korea, but their GDP per capita remains roughly equal. 
C)  Since their division after World War II, North Korea's economy has achieved greater economic growth than South Korea. 
D)  Starting from similar economic positions prior to their division after World War II, South Korea's economy has grown to about 40 times the size of the North Korean economy. 
A)  The economies of both North Korea and South Korea have grown at approximately the same rate since Korea was divided after World War II. 
B)  Since their division after World War II, South Korea has grown much faster than North Korea, but their GDP per capita remains roughly equal. 
C)  Since their division after World War II, North Korea's economy has achieved greater economic growth than South Korea. 
D)  Starting from similar economic positions prior to their division after World War II, South Korea's economy has grown to about 40 times the size of the North Korean economy.

Question 5

Coordination problems have led to the failure of command systems. Which of the following best exemplifies this problem?

Accepted Answer

A)  Managers had no incentive to address market surpluses or shortages, as long as they met production goals. 
B)  Workers were not motivated to work hard because of a lack of consumer goods to purchase. 
C)  Command economies try to minimize the use of capital goods, making production less efficient. 
D)  The complexity of production processes made it difficult to assure that all necessary inputs were provided at the right time and in the right amount. 
A)  Managers had no incentive to address market surpluses or shortages, as long as they met production goals. 
B)  Workers were not motivated to work hard because of a lack of consumer goods to purchase. 
C)  Command economies try to minimize the use of capital goods, making production less efficient. 
D)  The complexity of production processes made it difficult to assure that all necessary inputs were provided at the right time and in the right amount.

Question 6

- Refer to the above figure. If flow (8) is revenues and flow (4) is economic resources (land, labor, capital, and entrepreneurial ability), then box:

Accepted Answer

A)  A is the resource market and box B is the product market. 
B)  B is the resource market and box A is the product market. 
C)  C is the product market and box B is the resource market. 
D)  D is the product market and box B is the resource market. 
A)  A is the resource market and box B is the product market. 
B)  B is the resource market and box A is the product market. 
C)  C is the product market and box B is the resource market. 
D)  D is the product market and box B is the resource market.

Question 7

Which statement best describes a command economy?

Accepted Answer

A)  The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government. 
B)  The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets. 
C)  The production and allocation of goods and services is determined primarily through markets. 
D)  The production and allocation of goods and services is determined primarily through government. 
A)  The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government. 
B)  The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets. 
C)  The production and allocation of goods and services is determined primarily through markets. 
D)  The production and allocation of goods and services is determined primarily through government.

Question 8

Since the end of World War II:

Accepted Answer

A)  the economies of both North Korea and South Korea have grown at approximately the same rate. 
B)  both North and South Korea have adopted command economies. 
C)  North Korea's economy has achieved greater economic growth than South Korea. 
D)  the South Korean economy has grown faster than North Korea's economy. 
A)  the economies of both North Korea and South Korea have grown at approximately the same rate. 
B)  both North and South Korea have adopted command economies. 
C)  North Korea's economy has achieved greater economic growth than South Korea. 
D)  the South Korean economy has grown faster than North Korea's economy.

Question 9

Which of the following success indicators is present in a market system but lacking in a command system?

Accepted Answer

A)  Production targets. 
B)  Wages. 
C)  Income distribution standards. 
D)  Profit. 
A)  Production targets. 
B)  Wages. 
C)  Income distribution standards. 
D)  Profit.

Question 10

Which statement best describes a capitalist economy?

Accepted Answer

A)  The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government. 
B)  The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets. 
C)  The production and allocation of goods and services is determined primarily through markets. 
D)  The production and allocation of goods and services is determined primarily through government. 
A)  The production of goods and services is determined primarily by markets, but the allocation of goods and services is determined primarily by government. 
B)  The production of goods and services is determined primarily by government, but the allocation of goods and services is determined primarily by markets. 
C)  The production and allocation of goods and services is determined primarily through markets. 
D)  The production and allocation of goods and services is determined primarily through government.

Question 11

Which of the following statements is most accurate about capital accumulation in a market system?

Accepted Answer

A)  Capital accumulation is generally insufficient because consumers don't directly cast dollar votes for capital goods. 
B)  The invisible hand directs the production of consumer goods, but government planning is required to effectively allocate resources to capital goods. 
C)  Capital good production is the primary driver of the demand for consumer goods. 
D)  Entrepreneurs and business owners cast dollar votes for capital goods based on the profitability of goods and services they sell to consumers. 
A)  Capital accumulation is generally insufficient because consumers don't directly cast dollar votes for capital goods. 
B)  The invisible hand directs the production of consumer goods, but government planning is required to effectively allocate resources to capital goods. 
C)  Capital good production is the primary driver of the demand for consumer goods. 
D)  Entrepreneurs and business owners cast dollar votes for capital goods based on the profitability of goods and services they sell to consumers.

- Refer to the above figure. If box D represents the product market and flow (6) represents consumption expenditures, then box C is:

Based on the Index of Economic Freedom provided by the Heritage Foundation, which of the following nations is considered least free?

Which of the following statements best describes production outcomes in the Soviet Union and pre-reform China?

Which of the following statements is most accurate about the economies of North Korea and South Korea?

Coordination problems have led to the failure of command systems. Which of the following best exemplifies this problem?

- Refer to the above figure. If flow (8) is revenues and flow (4) is economic resources (land, labor, capital, and entrepreneurial ability), then box:

Which statement best describes a command economy?

Since the end of World War II:

Which of the following success indicators is present in a market system but lacking in a command system?

Which statement best describes a capitalist economy?

Which of the following statements is most accurate about capital accumulation in a market system?

Limits, Alternatives, and Choices

Demand, Supply, and Market Equilibrium

Elasticity of Demand and Supply

Market Failures: Public Goods and Externalities

Businesses and Their Costs

Pure Competition

Pure Monopoly

Monopolistic Competition and Oligopoly

GDP and Economic Growth

Business Cycles, Unemployment, and Inflation

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Interest Rates and Monetary Policy

International Trade and Exchange Rates

Wage Determination

Income Inequality and Poverty

Filters

Exam 2: The Market System and the Circular Flow

- Refer to the above figure. If box D represents the product market and flow (6) represents consumption expenditures, then box C is:

Based on the Index of Economic Freedom provided by the Heritage Foundation, which of the following nations is considered least free?

Which of the following statements best describes production outcomes in the Soviet Union and pre-reform China?

Which of the following statements is most accurate about the economies of North Korea and South Korea?

Coordination problems have led to the failure of command systems. Which of the following best exemplifies this problem?

- Refer to the above figure. If flow (8) is revenues and flow (4) is economic resources (land, labor, capital, and entrepreneurial ability), then box:

Which statement best describes a command economy?

Since the end of World War II:

Which of the following success indicators is present in a market system but lacking in a command system?

Which statement best describes a capitalist economy?

Which of the following statements is most accurate about capital accumulation in a market system?

Limits, Alternatives, and Choices

Demand, Supply, and Market Equilibrium

Elasticity of Demand and Supply

Market Failures: Public Goods and Externalities

Businesses and Their Costs

Pure Competition

Pure Monopoly

Monopolistic Competition and Oligopoly

GDP and Economic Growth

Business Cycles, Unemployment, and Inflation

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Interest Rates and Monetary Policy

International Trade and Exchange Rates

Wage Determination

Income Inequality and Poverty

Filters