Question 1

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.

Question 2

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems,

Accepted Answer

A)  the division of output is decided by central planning rather than by individuals operating freely through markets.
B)  all economic decisions are made by the government, whereas there is no government in laissez-faire capitalism.
C)  scarcity does not exist, whereas it does in laissez-faire capitalism.
D)  money is not used, whereas it is in laissez-faire capitalism.

Question 3

In the circular flow diagram, households get their ability to pay for their consumption expenditures from the

Accepted Answer

A)  revenues they receive for their products.
B)  costs they incur for resources.
C)  incomes they earn for their resources.
D)  goods and services they get in the product markets.

Question 4

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.

Accepted Answer

A) True 
 B)False

Question 5

South Korea has always been more prosperous than North Korea, even before 1953.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Accepted Answer

A) True 
 B)False

Question 9

How does 'consumer sovereignty' determine the types and quantities of the goods produced in an economy?

Accepted Answer

Consumers register their preferences for...

Question 10

Given the information, and assuming trade occurs between the three states, we can expect

Accepted Answer

A)  that there is no means by which Michigan can obtain lettuce while specializing in the production of autos.
B)  that money will not be needed to accomplish the desired exchanges.
C)  money to flow counter-clockwise from Michigan to Texas to Washington.
D)  money to flow clockwise from Michigan to Washington to Texas.

Question 11

Answer the question based on the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively.  If the price of product A is $0.50, the firm will realize

Accepted Answer

A)  an economic profit of $4.
B)  an economic profit of $2.
C)  an economic profit of $6.
D)  a loss of $3.

Question 12

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each, for a total revenue of $18.  Based on the data given in the table, the most economically efficient production technique is

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.

Question 13

Economic profits in an industry suggest the industry

Accepted Answer

A)  can earn more profits by increasing product price.
B)  should be larger to better satisfy consumers' desire for the product.
C)  has excess production capacity.
D)  is the size that consumers want it to be.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  buy products and resources.
B)  sell products and resources.
C)  buy products and sell resources.
D)  sell products and buy resources.

Question 16

The circular flow model illustrates

Accepted Answer

A)  the importance of having a central plan for the economy.
B)  how capital and other resources are created.
C)  how money is created by the banking system.
D)  the interdependence of businesses and consumers.

Question 17

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.

Question 18

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 19

The division of labor means that

Accepted Answer

A)  labor markets are geographically segmented.
B)  unskilled workers outnumber skilled workers.
C)  workers specialize in various production tasks.
D)  each worker performs a large number of tasks.

Question 20

Explain the importance of self-interest in the operation of a market system.

Accepted Answer

Self-interest is important because it is...

Exam 2: The Market System and the Circular Flow

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Specialization in production is economically beneficial primarily because it

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

South Korea has always been more prosperous than North Korea, even before 1953.

Correct AnswerverifiedShow Answer

Given the information, and assuming trade occurs between the three states, we can expect

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. Based on the data given in the table, the most economically efficient production technique is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Households and businesses are

Correct AnswerverifiedShow Answer

In the circular flow diagram, households get their ability to pay for their consumption expenditures from the

Correct AnswerverifiedShow Answer

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.

Correct AnswerverifiedShow Answer

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems,

Correct AnswerverifiedShow Answer

The circular flow model illustrates

Correct AnswerverifiedShow Answer

How does 'consumer sovereignty' determine the types and quantities of the goods produced in an economy?

Correct AnswerverifiedConsumers register their preferences for...View AnswerShow Answer

Explain the importance of self-interest in the operation of a market system.

Correct AnswerverifiedSelf-interest is important because it is...View AnswerShow Answer

Answer the question based on the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively. If the price of product A is $0.50, the firm will realize

Correct AnswerverifiedShow Answer

The division of labor means that

Correct AnswerverifiedShow Answer

Economic profits in an industry suggest the industry

Correct AnswerverifiedShow Answer

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Consumers register their preferences for...
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Self-interest is important because it is...
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