Question 1

Competition means that

Accepted Answer

A)   sellers can manipulate market price by causing product scarcities.
B)   there are independently acting buyers and sellers in each market.
C)   a product can be purchased at a number of different prices.
D)   there is more than one seller in a market.

Question 2

In a market system, resources will move away from an industry when

Accepted Answer

A)   proﬁts of ﬁrms in the industry are rising.
B)   demand for the industry's product is decreasing.
C)   the production of output in the industry is rising.
D)   proﬁts of ﬁrms in other industries are falling.

Question 3

In the circular ﬂow model, households act as buyers in the resource markets.

Accepted Answer

A) True 
 B)False

Question 4

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their
incomes as they see ﬁt.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Which is an example of barter?

Accepted Answer

A)   a person trades a desk for a box of tools
B)   a person buys clothes at a used clothing store
C)   a gift of tuition money from parents to their children
D)   the purchase of stock on the New York Stock Exchange

Question 7

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 the things mentioned in the other answers.

Question 8

Property rights give the government the right to own, use, and dispose of resources in an economy.

Accepted Answer

A) True 
 B)False

Question 9

(Consider This)  Bitcoin mining operations tend to maximize proﬁts by

Accepted Answer

A)   paying their labor minimum wage.
B)   using super computers.
C)   using low-cost electricity.
D)   operating in areas with little regulation.

Question 10

Continued losses in an industry will cause some ﬁrms to reduce output or eventually leave the industry.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Property rights give to some people the right to coerce others into giving up their property.

Accepted Answer

A) True 
 B)False

Question 13

(Last Word)  Today, Venezuela's economy is

Accepted Answer

A)   thriving, thanks to Bolivarian Socialism.
B)   expanding due to the clever idea of printing money to pay the government's bills.
C)   considered a laissez-faire economic system.
D)   ruined due to actions of incompetent political leaders.

Question 14

In a market system, the task of assessing and managing the business risk of a ﬁrm is taken on by the ﬁrm's

Accepted Answer

A)   labor.
B)   capital suppliers.
C)   entrepreneurs.
D)   customers.

Question 15

Anything that is generally acceptable in trading for goods and services is a

Accepted Answer

A)   medium of exchange.
B)   capital good.
C)   store of value.
D)   resource.

Question 16

In a competitive market economy, ﬁrms select the least-cost production technique because

Accepted Answer

A)   such choices will result in full employment of available resources.
B)   to do so will maximize the ﬁrms' proﬁts.
C)   this will prevent new ﬁrms from entering the industry.
D)   "dollar voting" by consumers mandates such a choice.

Question 17

Refer to the diagram. Flow 3 represents

Accepted Answer

A)   wage, rent, interest, and proﬁt income.
B)   land, labor, capital, and entrepreneurial ability.
C)   goods and services.
D)   consumer expenditures.

Question 18

Private property

Accepted Answer

A)   discourages cooperation because people don't want to part with what they own.
B)   discourages innovation, as people are often afraid to risk losing their own property.
C)   encourages owners to maintain or improve their property to preserve or enhance value.
D)   does everything indicated by the other answers.

Question 19

Which of the following characteristics is least unique to a market system?

Accepted Answer

A)   private ownership of property resources
B)   competition among buyers and sellers pursuing monetary returns
C)   the widespread use of money
D)   freedom of enterprise and choice

Question 20

An increase in the demand for a product and a reduction in its costs of production would

Accepted Answer

A)   decrease the proﬁts of producers.
B)   encourage ﬁrms to leave an industry.
C)   encourage ﬁrms to enter an industry.
D)   cause a shortage of the product.

Exam 2: The Market System and the Circular Flow

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

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Property rights give the government the right to own, use, and dispose of resources in an economy.

Correct AnswerverifiedShow Answer

In a market system, resources will move away from an industry when

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Which is an example of barter?

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Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see ﬁt.

Correct AnswerverifiedShow Answer

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

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In a market system, the task of assessing and managing the business risk of a ﬁrm is taken on by the ﬁrm's

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In a competitive market economy, ﬁrms select the least-cost production technique because

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Private property

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Which of the following characteristics is least unique to a market system?

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Competition means that

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(Last Word) Today, Venezuela's economy is

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Continued losses in an industry will cause some ﬁrms to reduce output or eventually leave the industry.

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An increase in the demand for a product and a reduction in its costs of production would

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Property rights give to some people the right to coerce others into giving up their property.

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Anything that is generally acceptable in trading for goods and services is a

Correct AnswerverifiedShow Answer

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

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(Consider This) Bitcoin mining operations tend to maximize proﬁts by

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Refer to the diagram. Flow 3 represents

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In the circular ﬂow model, households act as buyers in the resource markets.

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