Question 1

Which of the following is the main problem with the barter system of exchange?

Accepted Answer

A)   It encourages self-interest.
B)   It fosters the division of labor.
C)   It requires a coincidence of wants.
D)   It undermines the right to bequeath.E) B) and D)
F) A) and D)

Question 2

One major element of the command system is

Accepted Answer

A)   an emphasis on private ownership of resources.
B)   individual decentralized decision making.
C)   reliance on supply-and-demand forces to guide economic activity.
D)   central planning conducted by the government.E) A) and B)
F) B) and C)

Question 3

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Accepted Answer

A)   What will be produced?
B)   How will the output be produced?
C)   How will the system accommodate change?
D)   Who will get the output?E) A) and B)
F) A) and D)

Question 4

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Accepted Answer

A) True 
 B)False

Question 5

The "invisible hand" concept refers to the

Accepted Answer

A)   guiding function of prices in a market system.
B)   implicit influence that the government has on the actions of firms.
C)   regulatory structure that markets must operate in.
D)   underlying money flows that promote the trading of goods and services.E) A) and D)
F) All of the above

Question 6

Broadly defined, competition involves

Accepted Answer

A)   private property and freedom of expression.
B)   independently acting buyers and sellers and freedom to enter or leave markets.
C)   increasing opportunity costs and diminishing marginal utility.
D)   capital goods and division of labor.E) A) and B)
F) All of the above

Question 7

Payments that a firm makes to obtain needed resources comprise its

Accepted Answer

A)   costs.
B)   profits.
C)   capital.
D)   revenues.E) None of the above
F) A) and D)

Question 8

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. If the price of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Accepted Answer

A)   loss of $2 to a loss of $1.
B)   profit of $2 to a profit of $1.
C)   profit of $1 to a profit of $2.
D)   loss of $1 to a loss of $2.E) B) and D)
F) A) and D)

Question 9

In a market system, entrepreneurs start businesses in order to earn a high salary.

Accepted Answer

A) True 
 B)False

Question 10

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; productE) None of the above
F) All of the above

Question 11

The market system is an economic system that

Accepted Answer

A)   produces more consumer goods than capital goods.
B)   produces more capital goods than consumer goods.
C)   gives private individuals the right to own resources used in production.
D)   emphasizes the government's power to control markets and direct economic activity.E) B) and C)
F) A) and B)

Question 12

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 13

The problems of central planning become less complex as an economy grows in size over time.

Accepted Answer

A) True 
 B)False

Question 14

Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit.  Refer to the provided table. If the price of labor declines from $3 to $2 per unit, then what is the least costly way of producing Zenias?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) B) and C)
F) A) and D)

Question 15

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 marketsE) None of the above
F) A) and B)

Question 16

In the circular flow model of the market system, households' major role is to

Accepted Answer

A)   buy both products and resources.
B)   sell both products and resources.
C)   buy products and sell resources.
D)   sell products and buy resources.E) A) and C)
F) C) and D)

Question 17

Which of the following is assumed to be most limited in scope under a market system?

Accepted Answer

A)   entrepreneurship
B)   self-interest
C)   specialization
D)   governmentE) A) and B)
F) All of the above

Question 18

Even with the use of money, exchange and trade cannot occur if there is no coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 19

In a command system,

Accepted Answer

A)   self-interest motivates and commands each business firm's decisions and actions.
B)   the head of each family decides and commands what to do with the family's resources.
C)   a government-appointed planning board makes production and allocation decisions.
D)   market traders command what outputs are produced and how they are allocated.E) None of the above
F) B) and D)

Question 20

In the circular flow model, households earn their incomes in the

Accepted Answer

A)   resource markets.
B)   product markets.
C)   capitalist markets.
D)   money markets.E) B) and C)
F) None of the above

Exam 2: The Market System and the Circular Flow

One major element of the command system is

Correct Answer
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In a command system,

Correct Answer
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Broadly defined, competition involves

Correct Answer
verified

The "invisible hand" concept refers to the

Correct Answer
verified

The market system is an economic system that

Correct Answer
verified

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Correct Answer
verified

Which of the following is the main problem with the barter system of exchange?

Correct Answer
verified

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

Correct Answer
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Correct Answer
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The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. If the price of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Correct Answer
verified

The problems of central planning become less complex as an economy grows in size over time.

Correct Answer
verified

In the circular flow model, households earn their incomes in the

Correct Answer
verified

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Correct Answer
verified

Which of the following is assumed to be most limited in scope under a market system?

Correct Answer
verified

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

Correct Answer
verified

In the circular flow model of the market system, households' major role is to

Correct Answer
verified

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

Correct Answer
verified

Payments that a firm makes to obtain needed resources comprise its

Correct Answer
verified

In a market system, entrepreneurs start businesses in order to earn a high salary.

Correct Answer
verified

Even with the use of money, exchange and trade cannot occur if there is no coincidence of wants.

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

One major element of the command system is

Correct AnswerverifiedShow Answer

In a command system,

Correct AnswerverifiedShow Answer

Broadly defined, competition involves

Correct AnswerverifiedShow Answer

The "invisible hand" concept refers to the

Correct AnswerverifiedShow Answer

The market system is an economic system that

Correct AnswerverifiedShow Answer

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Correct AnswerverifiedShow Answer

Which of the following is the main problem with the barter system of exchange?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. If the price of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Correct AnswerverifiedShow Answer

The problems of central planning become less complex as an economy grows in size over time.

Correct AnswerverifiedShow Answer

In the circular flow model, households earn their incomes in the

Correct AnswerverifiedShow Answer

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Correct AnswerverifiedShow Answer

Which of the following is assumed to be most limited in scope under a market system?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the circular flow model of the market system, households' major role is to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Payments that a firm makes to obtain needed resources comprise its

Correct AnswerverifiedShow Answer

In a market system, entrepreneurs start businesses in order to earn a high salary.

Correct AnswerverifiedShow Answer

Even with the use of money, exchange and trade cannot occur if there is no coincidence of wants.

Correct AnswerverifiedShow Answer

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