Question 1

Households and businesses are:

Accepted Answer

A)  both buyers in the resource market. 
B)  both sellers in the product market. 
C)  sellers in the resource and product markets respectively. 
D)  sellers in the product and resource markets respectively. 
A)  both buyers in the resource market. 
B)  both sellers in the product market. 
C)  sellers in the resource and product markets respectively. 
D)  sellers in the product and resource markets respectively. C

Question 2

If products were in short or surplus supply in the Soviet Union:

Accepted Answer

A)  price and profit signals eliminated those shortages and surpluses. 
B)  price and profit signals intensified those shortages and surpluses. 
C)  producers would not react because no price or profit signals occurred. 
D)  the planners would immediately adjust production to achieve equilibrium. 
A)  price and profit signals eliminated those shortages and surpluses. 
B)  price and profit signals intensified those shortages and surpluses. 
C)  producers would not react because no price or profit signals occurred. 
D)  the planners would immediately adjust production to achieve equilibrium. C

Question 3

In terms of the circular flow diagram,businesses obtain revenue through the _____ market and make expenditures in 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 C

Question 4

(Consider This)North Korea's command economy:

Accepted Answer

A)  is one of the few remaining command economies. 
B)  has grown much faster than South Korea's economy since the two countries were divided after World War II. 
C)  produces a per capita GDP of nearly $25,000. 
D)  has undergone significant market reforms and is now one of the fastest-growing economies. 
A)  is one of the few remaining command economies. 
B)  has grown much faster than South Korea's economy since the two countries were divided after World War II. 
C)  produces a per capita GDP of nearly $25,000. 
D)  has undergone significant market reforms and is now one of the fastest-growing economies.

Question 5

From society's point of view,the economic function of profits and losses is to:

Accepted Answer

A)  promote the equal distribution of real assets and wealth. 
B)  achieve full employment and price level stability. 
C)  contribute to a more equal distribution of income. 
D)  reallocate resources from less desired to more desired uses. 
A)  promote the equal distribution of real assets and wealth. 
B)  achieve full employment and price level stability. 
C)  contribute to a more equal distribution of income. 
D)  reallocate resources from less desired to more desired uses.

Question 6

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center,then:

Accepted Answer

A)  government should regulate the business to ensure quality. 
B)  the profit Susie earns indicates that she is overcharging for her services. 
C)  she has served society's interests by providing a desired good or service. 
D)  this demonstrates that consumer sovereignty is not present in this market. 
A)  government should regulate the business to ensure quality. 
B)  the profit Susie earns indicates that she is overcharging for her services. 
C)  she has served society's interests by providing a desired good or service. 
D)  this demonstrates that consumer sovereignty is not present in this market.

Question 7

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 8

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:

Accepted Answer

A)  "With as much machinery as possible." 
B)  "Using the latest technology." 
C)  "By exploiting labor." 
D)  "In ways that minimize the cost per unit of output." 
A)  "With as much machinery as possible." 
B)  "Using the latest technology." 
C)  "By exploiting labor." 
D)  "In ways that minimize the cost per unit of output."

Question 9

Which of the following is a distinguishing feature of laissez-faire capitalism?

Accepted Answer

A)  Public ownership of all capital. 
B)  Central planning. 
C)  Minimal government intervention. 
D)  A circular flow of goods,resources,and money. 
A)  Public ownership of all capital. 
B)  Central planning. 
C)  Minimal government intervention. 
D)  A circular flow of goods,resources,and money.

Question 10

Market economies use capital goods because they improve productive efficiency.

Accepted Answer

A) True 
 B)False

Question 11

"Consumer sovereignty" means that:

Accepted Answer

A)  buyers can dictate the prices at which goods and services will be offered. 
B)  advertising is ineffective because consumers already know what they want. 
C)  buyers control the quality of goods and services through regulatory agencies. 
D)  buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers. 
A)  buyers can dictate the prices at which goods and services will be offered. 
B)  advertising is ineffective because consumers already know what they want. 
C)  buyers control the quality of goods and services through regulatory agencies. 
D)  buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

In a market system,employees and suppliers:

Accepted Answer

A)  are usually shielded from risk,but at the cost of not sharing in the profits of the firm. 
B)  are usually shielded from risk and share in the profits of the firm. 
C)  are generally subject to as much risk as firm owners but get to share in the profits. 
D)  bear as much risk as firm owners but don't get to share in the profits. 
A)  are usually shielded from risk,but at the cost of not sharing in the profits of the firm. 
B)  are usually shielded from risk and share in the profits of the firm. 
C)  are generally subject to as much risk as firm owners but get to share in the profits. 
D)  bear as much risk as firm owners but don't get to share in the profits.

Question 15

The economic function of profits and losses is to:

Accepted Answer

A)  bring about a more equal distribution of income. 
B)  signal that resources should be reallocated. 
C)  eliminate small firms and reduce competition. 
D)  tell government which industries need to be subsidized. 
A)  bring about a more equal distribution of income. 
B)  signal that resources should be reallocated. 
C)  eliminate small firms and reduce competition. 
D)  tell government which industries need to be subsidized.

Question 16

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 17

Risk is a problem faced:

Accepted Answer

A)  only in market systems. 
B)  only in command systems. 
C)  in both market systems and command systems. 
D)  in neither market systems nor command systems,only in laissez-faire capitalism. 
A)  only in market systems. 
B)  only in command systems. 
C)  in both market systems and command systems. 
D)  in neither market systems nor command systems,only in laissez-faire capitalism.

Question 18

The market system:

Accepted Answer

A)  produces considerable inefficiency in the use of scarce resources. 
B)  effectively harnesses the incentives of workers and entrepreneurs. 
C)  is not consistent with freedom of choice in the long run. 
D)  has slowly lost ground to emerging command systems. 
A)  produces considerable inefficiency in the use of scarce resources. 
B)  effectively harnesses the incentives of workers and entrepreneurs. 
C)  is not consistent with freedom of choice in the long run. 
D)  has slowly lost ground to emerging command systems.

Question 19

Central planning often suffers from a coordination problem and an incentive problem.

Accepted Answer

A) True 
 B)False

Question 20

(Consider This)Which of the following statements about insurance and risk is true?

Accepted Answer

A)  Insurance inhibits economic growth and investment by discouraging risk-taking. 
B)  Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk. 
C)  Insurance companies always earn profits because insurance premiums always exceed the payout for insured events. 
D)  Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk. 
A)  Insurance inhibits economic growth and investment by discouraging risk-taking. 
B)  Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk. 
C)  Insurance companies always earn profits because insurance premiums always exceed the payout for insured events. 
D)  Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk.

Exam 2: The Market System and the Circular Flow

Households and businesses are:

If products were in short or surplus supply in the Soviet Union:

In terms of the circular flow diagram,businesses obtain revenue through the _____ market and make expenditures in the _____ market.

(Consider This)North Korea's command economy:

From society's point of view,the economic function of profits and losses is to:

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center,then:

In the simple circular flow model:

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:

Which of the following is a distinguishing feature of laissez-faire capitalism?

Market economies use capital goods because they improve productive efficiency.

"Consumer sovereignty" means that:

Economic systems differ according to which two main characteristics?

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

In a market system,employees and suppliers:

The economic function of profits and losses is to:

The presence of market failures implies that:

Risk is a problem faced:

The market system:

Central planning often suffers from a coordination problem and an incentive problem.

(Consider This)Which of the following statements about insurance and risk is true?

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters

In terms of the circular flow diagram,businesses obtain revenue through the _ market and make expenditures in the _ market.