Question 1

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that

Accepted Answer

A)  product quality was neglected.
B)  production costs were minimized.
C)  product mix met consumer needs.
D)  technological advance was too rapid.

Question 2

How does human specialization contribute toward increasing an economy's output?

Accepted Answer

A)  It exploits the differences in abilities.
B)  It is a process of creative destruction.
C)  It pushes each worker to master the whole product.
D)  It encourages people to be a "jack-of-all-trades."

Question 3

The term dollar votes in a market system means

Accepted Answer

A)  inflation will occur if consumers don't spend wisely.
B)  voters may be offered dollars to help elect certain political candidates.
C)  government is responsible for determining what will be considered legal tender.
D)  consumers "vote" for certain products to be produced by how they spend their incomes.

Question 4

Refer to the diagram. Arrows (1) and (3) are associated with

Accepted Answer

A)  the money market.
B)  the resource market.
C)  the product market.
D)  international trade.

Question 5

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 6

In a market economy, the distribution of output will be determined primarily by

Accepted Answer

A)  consumer needs and preferences.
B)  the quantities and prices of the resources that households supply.
C)  government regulations that provide a minimum income for all.
D)  a social consensus as to which distribution of income is most equitable.

Question 7

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Accepted Answer

A)  a more stable macroeconomy with fewer recessions
B)  Firms are better able to attract inputs, as these inputs do not have to share the risk.
C)  Government agencies are better prepared to help when businesses fail.
D)  consistently lower prices for consumers

Question 8

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.

Question 9

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

Accepted Answer

A) True 
 B)False

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

Which of the following guides sensible decisions regarding the management of business risk in a market system?

Accepted Answer

A)  the profit and loss system
B)  the "invisible hand"
C)  taxes and subsidies
D)  consumer sovereignty

Question 12

Selfishness and self-interest are identical concepts in economics.

Accepted Answer

A) True 
 B)False

Question 13

Market economies use capital goods because they improve productive efficiency.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

Specialization-the division of labor-enhances productivity and efficiency by

Accepted Answer

A)  allowing workers to take advantage of existing differences in their abilities and skills.
B)  avoiding the time loss involved in shifting from one production task to another.
C)  allowing workers to develop skills by working on one, or a limited number, of tasks.
D)  all of the means identified in the other answers.

Question 16

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. Which technique is the most economically efficient way of producing Zenia?

Accepted Answer

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

Question 17

Describe two types of specialization in production.

Accepted Answer

One type of specialization is human spec...

Question 18

The problems of central planning become less complex as an economy expands over time.

Accepted Answer

A) True 
 B)False

Question 19

In the circular flow diagram, firms get their ability to pay for the costs of production from the

Accepted Answer

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

Question 20

Economic efficiency entails producing a certain output with the minimum number of units of inputs.

Accepted Answer

A) True 
 B)False

Exam 2: The Market System and the Circular Flow

Selfishness and self-interest are identical concepts in economics.

Correct Answer
verified

Economic efficiency entails producing a certain output with the minimum number of units of inputs.

Correct Answer
verified

Describe two types of specialization in production.

Correct Answer
verified
One type of specialization is human spec...
View Answer

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Correct Answer
verified

Market economies use capital goods because they improve productive efficiency.

Correct Answer
verified

Two major virtues of the market system are that it

Correct Answer
verified

The problems of central planning become less complex as an economy expands over time.

Correct Answer
verified

How does human specialization contribute toward increasing an economy's output?

Correct Answer
verified

Which of the following guides sensible decisions regarding the management of business risk in a market system?

Correct Answer
verified

In a market economy, the distribution of output will be determined primarily by

Correct Answer
verified

Correct Answer
verified

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that

Correct Answer
verified

Refer to the diagram. Arrows (1) and (3) are associated with

Correct Answer
verified

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

Correct Answer
verified

Specialization-the division of labor-enhances productivity and efficiency by

Correct Answer
verified

In the circular flow diagram, firms get their ability to pay for the costs of production from the

Correct Answer
verified

Refer to the diagram. Flow 3 represents

Correct Answer
verified

The term dollar votes in a market system means

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

Selfishness and self-interest are identical concepts in economics.

Correct AnswerverifiedShow Answer

Economic efficiency entails producing a certain output with the minimum number of units of inputs.

Correct AnswerverifiedShow Answer

Describe two types of specialization in production.

Correct AnswerverifiedOne type of specialization is human spec...View AnswerShow Answer

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Correct AnswerverifiedShow Answer

Market economies use capital goods because they improve productive efficiency.

Correct AnswerverifiedShow Answer

Two major virtues of the market system are that it

Correct AnswerverifiedShow Answer

The problems of central planning become less complex as an economy expands over time.

Correct AnswerverifiedShow Answer

How does human specialization contribute toward increasing an economy's output?

Correct AnswerverifiedShow Answer

Which of the following guides sensible decisions regarding the management of business risk in a market system?

Correct AnswerverifiedShow Answer

In a market economy, the distribution of output will be determined primarily by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that

Correct AnswerverifiedShow Answer

Refer to the diagram. Arrows (1) and (3) are associated with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Specialization-the division of labor-enhances productivity and efficiency by

Correct AnswerverifiedShow Answer

In the circular flow diagram, firms get their ability to pay for the costs of production from the

Correct AnswerverifiedShow Answer

Refer to the diagram. Flow 3 represents

Correct AnswerverifiedShow Answer

The term dollar votes in a market system means

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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One type of specialization is human spec...
View Answer

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