Question 1

Which of the following statements about the right to private ownership is false?

Accepted Answer

A)  It enables individuals to obtain, use, and dispose of land and capital resources as they see fit. 
B)  It encourages investment and innovation, and thus fosters economic growth. 
C)  It extends to intangibles such as pieces of music and computer programs. 
D)  It weakens the incentive to maintain the property that one already owns. 
A)  It enables individuals to obtain, use, and dispose of land and capital resources as they see fit. 
B)  It encourages investment and innovation, and thus fosters economic growth. 
C)  It extends to intangibles such as pieces of music and computer programs. 
D)  It weakens the incentive to maintain the property that one already owns. D

Question 2

If competitive industry Z is making substantial economic profit, output will

Accepted Answer

A)  fall in industry Z and firms will likely leave the market. 
B)  fall in all industries except industry Z. 
C)  expand in industry Z, as more resources will move to that industry. 
D)  expand in industry Z, but no new firms will enter the market. 
A)  fall in industry Z and firms will likely leave the market. 
B)  fall in all industries except industry Z. 
C)  expand in industry Z, as more resources will move to that industry. 
D)  expand in industry Z, but no new firms will enter the market. C

Question 3

With specialization in a market economy, individual

Accepted Answer

A)  firms produce a wide range of products. 
B)  producers consume little or none of the products they produce. 
C)  producers consume most of the output that they produce. 
D)  consumers have to produce most of what they consume. 
A)  firms produce a wide range of products. 
B)  producers consume little or none of the products they produce. 
C)  producers consume most of the output that they produce. 
D)  consumers have to produce most of what they consume. B

Question 4

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 5

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 6

An important aspect of the market system is that producers and consumers always have to consider the public interest in making production and consumption decisions.

Accepted Answer

A) True 
 B)False

Question 7

Barter

Accepted Answer

A)  is the major means of exchange in centrally planned economies. 
B)  accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy. 
C)  entails the exchange of goods for goods. 
D)  is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers. 
A)  is the major means of exchange in centrally planned economies. 
B)  accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy. 
C)  entails the exchange of goods for goods. 
D)  is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers.

Question 8

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

Accepted Answer

A)  Which products will be in scarce supply and which in excess supply? 
B)  Who should appoint the head of the central bank? 
C)  How much should society save? 
D)  What goods and services will be produced? 
A)  Which products will be in scarce supply and which in excess supply? 
B)  Who should appoint the head of the central bank? 
C)  How much should society save? 
D)  What goods and services will be produced?

Question 9

"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 10

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially
A)"Those most willing and able to pay for them."
B)"Those who physically produced them."
C)"Those who most need them."
D)"Those who get utility from them."

Accepted Answer

The answer of The market system's answer to the fundamental...

Question 11

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 12

One essential trade-off involving business risk in a market system is reflected in which of the following statements?

Accepted Answer

A)  Access to the firm's profits and gains are open only to those who take on the business risk of the firm. 
B)  Those who receive guaranteed payments from the firm are also guaranteed a share of the firm's profits. 
C)  Those who make bad decisions regarding risk will suffer losses; those who decide wisely will gain profits. 
D)  Those who bear the business risk of the firm are guaranteed to always gain profits. 
A)  Access to the firm's profits and gains are open only to those who take on the business risk of the firm. 
B)  Those who receive guaranteed payments from the firm are also guaranteed a share of the firm's profits. 
C)  Those who make bad decisions regarding risk will suffer losses; those who decide wisely will gain profits. 
D)  Those who bear the business risk of the firm are guaranteed to always gain profits.

Question 13

By freedom of enterprise, we mean that individual

Accepted Answer

A)  workers are free to look for jobs and work in whichever firm will hire them. 
B)  firms are free to employ resources, to produce their output, and to sell their products. 
C)  producers are free to produce whatever the government decides is needed by the society. 
D)  consumers are free to buy whatever products will satisfy their needs the most. 
A)  workers are free to look for jobs and work in whichever firm will hire them. 
B)  firms are free to employ resources, to produce their output, and to sell their products. 
C)  producers are free to produce whatever the government decides is needed by the society. 
D)  consumers are free to buy whatever products will satisfy their needs the most.

Question 14

Two major virtues of the market system are that it

Accepted Answer

A)  allocates resources efficiently and allows economic freedom. 
B)  results in an equitable personal distribution of income and always maintains full employment. 
C)  results in price-level stability and a fair personal distribution of income. 
D)  eliminates discrimination and minimizes environmental pollution. 
A)  allocates resources efficiently and allows economic freedom. 
B)  results in an equitable personal distribution of income and always maintains full employment. 
C)  results in price-level stability and a fair personal distribution of income. 
D)  eliminates discrimination and minimizes environmental pollution.

Question 15

Specialization may expand total output even though the individuals involved may have identical abilities.

Accepted Answer

A) True 
 B)False

Question 16

The main characteristics of a modern market system include all of the following except

Accepted Answer

A)  entrepreneurs are free to obtain and use resources to produce goods and services. 
B)  consumers are free to buy goods and services that their budgets allow. 
C)  economic power is diffused by competition among economic units. 
D)  government is restricted to national defense and does not intervene at all in various markets. 
A)  entrepreneurs are free to obtain and use resources to produce goods and services. 
B)  consumers are free to buy goods and services that their budgets allow. 
C)  economic power is diffused by competition among economic units. 
D)  government is restricted to national defense and does not intervene at all in various markets.

Question 17

Refer to the provided figure. If box A represents households, B the product market, and C businesses, and if flow (3) represents revenues, then flow (1) would represent

Accepted Answer

A)  costs. 
B)  money income. 
C)  consumption expenditures. 
D)  resources. 
A)  costs. 
B)  money income. 
C)  consumption expenditures. 
D)  resources.

Question 18

An increase in consumer desire for strawberries is most likely to

Accepted Answer

A)  increase the number of strawberry pickers needed by farmers. 
B)  reduce the supply of strawberries. 
C)  reduce the number of people willing to pick strawberries. 
D)  reduce the need for strawberry pickers. 
A)  increase the number of strawberry pickers needed by farmers. 
B)  reduce the supply of strawberries. 
C)  reduce the number of people willing to pick strawberries. 
D)  reduce the need for strawberry pickers.

Question 19

Which of the following statements about markets and prices is correct?

Accepted Answer

A)  In a market system, buyers and sellers must be in face-to-face contact with each other. 
B)  Prices affect the distribution of goods in a market system, but not the allocation of resources. 
C)  In a market system, prices serve to ration goods and services to consumers. 
D)  The operation of a market system has little, if any, effect on the distribution of income in the economy. 
A)  In a market system, buyers and sellers must be in face-to-face contact with each other. 
B)  Prices affect the distribution of goods in a market system, but not the allocation of resources. 
C)  In a market system, prices serve to ration goods and services to consumers. 
D)  The operation of a market system has little, if any, effect on the distribution of income in the economy.

Question 20

The economy of the United States in the past can best be described as laissez-faire capitalism.

Accepted Answer

A) True 
 B)False

Exam 2: The Market System and the Circular Flow

Which of the following statements about the right to private ownership is false?

If competitive industry Z is making substantial economic profit, output will

With specialization in a market economy, individual

Competition in a market system denotes a condition where

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

An important aspect of the market system is that producers and consumers always have to consider the public interest in making production and consumption decisions.

Barter

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

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

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially A)"Those most willing and able to pay for them." B)"Those who physically produced them." C)"Those who most need them." D)"Those who get utility from them."

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

One essential trade-off involving business risk in a market system is reflected in which of the following statements?

By freedom of enterprise, we mean that individual

Two major virtues of the market system are that it

Specialization may expand total output even though the individuals involved may have identical abilities.

The main characteristics of a modern market system include all of the following except

Refer to the provided figure. If box A represents households, B the product market, and C businesses, and if flow (3) represents revenues, then flow (1) would represent

An increase in consumer desire for strawberries is most likely to

Which of the following statements about markets and prices is correct?

The economy of the United States in the past can best be described as laissez-faire capitalism.

Limits, Alternatives, and Choices

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role 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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