Question 1

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 2

Of the following countries,which one best exhibits the characteristics of a market economy?

Accepted Answer

A)  Canada. 
B)  Cuba. 
C)  North Korea. 
D)  Belarus. 
A)  Canada. 
B)  Cuba. 
C)  North Korea. 
D)  Belarus.

Question 3

Risk management in command economies:

Accepted Answer

A)  is easy because there is no risk. 
B)  is easy because the government controls most activity and can eliminate risk. 
C)  tends to be done poorly because government officials do not understand risk. 
D)  tends to be done poorly because decision makers are insulated from the risk of making a poor decision. 
A)  is easy because there is no risk. 
B)  is easy because the government controls most activity and can eliminate risk. 
C)  tends to be done poorly because government officials do not understand risk. 
D)  tends to be done poorly because decision makers are insulated from the risk of making a poor decision.

Question 4

The "coincidence of wants" problem associated with barter refers to the fact that:

Accepted Answer

A)  for exchange to occur,each seller must have a product that some buyer wants. 
B)  money must be used as a medium of exchange or trade will never occur. 
C)  specialization is restricted by the size or scope of a market. 
D)  buyers in resource markets and sellers in product markets can never engage in exchange. 
A)  for exchange to occur,each seller must have a product that some buyer wants. 
B)  money must be used as a medium of exchange or trade will never occur. 
C)  specialization is restricted by the size or scope of a market. 
D)  buyers in resource markets and sellers in product markets can never engage in exchange.

Question 5

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

Accepted Answer

A)  Private property. 
B)  Freedom of enterprise. 
C)  Government ownership of most property resources. 
D)  Competition in product and resource markets. 
A)  Private property. 
B)  Freedom of enterprise. 
C)  Government ownership of most property resources. 
D)  Competition in product and resource markets.

Question 6

Innovation lagged in the centrally planned economies because:

Accepted Answer

A)  there was too much domestic business competition. 
B)  there was too much competition from foreign firms. 
C)  enterprises resisted innovation in fear that their production targets would be raised. 
D)  exports had to equal imports for the plan to work. 
A)  there was too much domestic business competition. 
B)  there was too much competition from foreign firms. 
C)  enterprises resisted innovation in fear that their production targets would be raised. 
D)  exports had to equal imports for the plan to work.

Question 7

(Consider This)In 1975,McDonald's introduced its Egg McMuffin breakfast sandwich,which remains popular and profitable today.This longevity illustrates the idea of:

Accepted Answer

A)  opportunity cost. 
B)  upsloping supply. 
C)  consumer sovereignty. 
D)  specialization. 
A)  opportunity cost. 
B)  upsloping supply. 
C)  consumer sovereignty. 
D)  specialization.

Question 8

The incentive problem under communist central planning refers to the idea that:

Accepted Answer

A)  planners had to direct required inputs to each enterprise. 
B)  workers,managers,and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products. 
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)  workers,managers,and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products. 
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 9

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 10

The guiding function of prices tends to keep resources flowing toward their most highly valued uses.

Accepted Answer

A) True 
 B)False

Question 11

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 of these. 
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 of these.

Question 12

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

Accepted Answer

A) True 
 B)False

Question 13

If consumer desire for product X increases,all of the following will occur except:

Accepted Answer

A)  an increase in the profits of industry X. 
B)  an increase in the quantity of resources employed by industry X. 
C)  an increase in the output of industry X. 
D)  a decrease in the quantity of resources employed in industry X. 
A)  an increase in the profits of industry X. 
B)  an increase in the quantity of resources employed by industry X. 
C)  an increase in the output of industry X. 
D)  a decrease in the quantity of resources employed in industry X.

Question 14

Command systems are also known as:

Accepted Answer

A)  market systems. 
B)  pure capitalism. 
C)  laissez-faire capitalism. 
D)  communism. 
A)  market systems. 
B)  pure capitalism. 
C)  laissez-faire capitalism. 
D)  communism.

Question 15

An economic system:

Accepted Answer

A)  requires a grouping of private markets linked to one another. 
B)  is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem. 
C)  requires some sort of centralized authority (such as government)to coordinate economic activity. 
D)  is a plan or scheme that allows a firm to make money at some other firm's expense. 
A)  requires a grouping of private markets linked to one another. 
B)  is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem. 
C)  requires some sort of centralized authority (such as government)to coordinate economic activity. 
D)  is a plan or scheme that allows a firm to make money at some other firm's expense.

Question 16

Answer the question using the following data,which show all available techniques for producing 20 units of a particular commodity: $\begin{array}{c}
\quad\quad\quad\quad\quad\quad\quad\text {Resource}\quad\quad\quad\quad\quad\text { Possible Production Techniques }\
\begin{array}{lll}
\
\underline{\text {Resource}}\
 \text {Land}\
 \text {Labor}\
 \text {Capital}\
 \text {Entrepreneurial Ability}
\end{array}
\begin{array}{c}
\
\underline{\text {Prices}}\
\$ 4\
3\
3\
2
\end{array}
\begin{array}{c}
\
\quad\quad\quad\quad\quad\quad\quad\quad\quad\underline{\# 1} \
 \quad\quad\quad\quad\quad\quad\quad\quad\quad2 \
\quad\quad\quad\quad\quad\quad\quad\quad\quad1 \
\quad\quad\quad\quad\quad\quad\quad\quad\quad5 \
\quad\quad\quad\quad\quad\quad\quad\quad\quad3
\end{array}
\begin{array}{c}
\
\underline{\# 2 }\
 4 \
2 \
2 \
1
\end{array}
\begin{array}{c}
\
\underline{\#3 }\
 2 \
4 \
3 \
1
\end{array}
\begin{array}{c}
\
\underline{\# 4 }\
 4 \
1 \
1 \
4
\end{array}
\begin{array}{c}
\
\underline{\# 5 }\
 4 \
3 \
2 \
1
\end{array}
\end{array}$
 Refer to the data.If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land,3 of labor,1 of capital,and 2 of entrepreneurial ability,this technique would:

Accepted Answer

A)  not be adopted because,although it reduces production costs,it does not increase profit. 
B)  be adopted because it would lower production costs and increase economic profit. 
C)  not be adopted because it entails higher production costs than other available techniques. 
D)  be adopted,even though economic profits would be reduced slightly. 
A)  not be adopted because,although it reduces production costs,it does not increase profit. 
B)  be adopted because it would lower production costs and increase economic profit. 
C)  not be adopted because it entails higher production costs than other available techniques. 
D)  be adopted,even though economic profits would be reduced slightly.

Question 17

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy.This statement best describes the concept of:

Accepted Answer

A)  derived demand. 
B)  consumer sovereignty. 
C)  the invisible hand. 
D)  market failure. 
A)  derived demand. 
B)  consumer sovereignty. 
C)  the invisible hand. 
D)  market failure.

Question 18

Which of the following best illustrates the circular flow model in action?

Accepted Answer

A)  Bobbie goes to work and builds cars,and uses the income she receives to buy food at the grocery store. 
B)  Evan buys a new couch;the owner of the furniture store uses some of the money from the sale to pay her supplier,and uses the rest to take her family out to dinner. 
C)  Boeing experiences a surge in orders for new airplanes,prompting the company to hire more workers. 
D)  All of these answers illustrate the workings of the circular flow model. 
A)  Bobbie goes to work and builds cars,and uses the income she receives to buy food at the grocery store. 
B)  Evan buys a new couch;the owner of the furniture store uses some of the money from the sale to pay her supplier,and uses the rest to take her family out to dinner. 
C)  Boeing experiences a surge in orders for new airplanes,prompting the company to hire more workers. 
D)  All of these answers illustrate the workings of the circular flow model.

Question 19

Specialization in production is economically beneficial primarily because it:

Accepted Answer

A)  allows everyone to have a job that he or she likes. 
B)  permits the production of a larger output with fixed amounts of resources. 
C)  facilitates trade by bartering. 
D)  guarantees full employment. 
A)  allows everyone to have a job that he or she likes. 
B)  permits the production of a larger output with fixed amounts of resources. 
C)  facilitates trade by bartering. 
D)  guarantees full employment.

Question 20

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.

An increase in consumer desire for strawberries is most likely to:

Of the following countries,which one best exhibits the characteristics of a market economy?

Risk management in command economies:

The "coincidence of wants" problem associated with barter refers to the fact that:

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

Innovation lagged in the centrally planned economies because:

(Consider This)In 1975,McDonald's introduced its Egg McMuffin breakfast sandwich,which remains popular and profitable today.This longevity illustrates the idea of:

The incentive problem under communist central planning refers to the idea that:

Two major virtues of the market system are that it:

The guiding function of prices tends to keep resources flowing toward their most highly valued uses.

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

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

If consumer desire for product X increases,all of the following will occur except:

Command systems are also known as:

An economic system:

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy.This statement best describes the concept of:

Which of the following best illustrates the circular flow model in action?

Specialization in production is economically beneficial primarily because it:

The invisible hand concept suggests that:

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

Exam 2: The Market System and the Circular Flow

An increase in consumer desire for strawberries is most likely to:

Of the following countries,which one best exhibits the characteristics of a market economy?

Risk management in command economies:

The "coincidence of wants" problem associated with barter refers to the fact that:

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

Innovation lagged in the centrally planned economies because:

(Consider This)In 1975,McDonald's introduced its Egg McMuffin breakfast sandwich,which remains popular and profitable today.This longevity illustrates the idea of:

The incentive problem under communist central planning refers to the idea that:

Two major virtues of the market system are that it:

The guiding function of prices tends to keep resources flowing toward their most highly valued uses.

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

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

If consumer desire for product X increases,all of the following will occur except:

Command systems are also known as:

An economic system:

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy.This statement best describes the concept of:

Which of the following best illustrates the circular flow model in action?

Specialization in production is economically beneficial primarily because it:

The invisible hand concept suggests that:

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