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

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 3

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 4

On the basis of the information, it can be said that

Accepted Answer

A)   no coincidence of wants exists between any two states.
B)   a coincidence of wants exists between Michigan and Washington.
C)   a coincidence of wants exists between Texas and Washington.
D)   a coincidence of wants exists between Michigan and Texas.

Question 5

(Consider This) South Korea has always been more prosperous than North Korea, even before 1953.

Accepted Answer

A) True 
 B)False

Question 6

Describe three ways that human specialization contributes to society's output.

Accepted Answer

Human specialization makes use of differ...

Question 7

The economies of North Korea and Cuba are

Accepted Answer

A)   similar in that they are both basically command systems.
B)   similar in that they are both basically market systems.
C)   different in that North Korea has a command system, while Cuba has a market system.
D)   different in that Cuba has a command system, while North Korea has a market system.

Question 8

The market system is also known as ___, while the command system is also known as _____.

Accepted Answer

A)   capitalism; socialism
B)   socialism; communism
C)   central planning; laissez faire
D)   a production system; a planning system

Question 9

Refer to the diagram. Flow 4 represents

Accepted Answer

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

Question 10

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 per unit of labor were to increase from $2 to $3, the most eﬃcient production technique
Would then be

Accepted Answer

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

Question 11

The French term "laissez-faire" means

Accepted Answer

A)   "there is no free lunch."
B)   "let it be."
C)   "circular ﬂow."
D)   "public ownership."

Question 12

Refer to the diagram. Arrows (3)  and (4)  represent

Accepted Answer

A)   goods and services, respectively.
B)   incomes and consumer expenditures, respectively.
C)   resources and goods, respectively.
D)   consumer expenditures and income, respectively.

Question 13

(Consider This)  Today, South Korea's economy

Accepted Answer

A)   produces a GDP per capita of $1,700.
B)   is considered a command economy.
C)   has a lower GDP per capita than North Korea's economy.
D)   is more developed and prosperous, producing an average annual income of $39,500.

Question 14

Examples of command economies are

Accepted Answer

A)   the United States and Japan.
B)   Sweden and Norway.
C)   Mexico and Brazil.
D)   Cuba and North Korea.

Question 15

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.
 Using technique A will result in an

Accepted Answer

A)   economic loss of $2.
B)   economic proﬁt of $1.
C)   economic proﬁt of $2.
D)   economic proﬁt of $3.

Question 16

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 17

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.

Question 18

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 19

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the

Accepted Answer

A)   guiding function of prices.
B)   monetary function of prices.
C)   circular ﬂow of income.
D)   market determination of prices.

Question 20

The invisible hand promotes society's interests because

Accepted Answer

A)   individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.
B)   individuals will produce goods for others out of concern for their fellow human beings.
C)   it makes sure that everyone wins from competition in the market.
D)   government regulation pushes business into producing the right mix of goods and services.

Exam 2: The Market System and the Circular Flow

Examples of command economies are

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Refer to the diagram. Arrows (3) and (4) represent

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Specialization in production is economically beneﬁcial primarily because it

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Refer to the diagram. Flow 4 represents

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(Consider This) South Korea has always been more prosperous than North Korea, even before 1953.

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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. Using technique A will result in an

Correct AnswerverifiedShow Answer

Describe three ways that human specialization contributes to society's output.

Correct AnswerverifiedHuman specialization makes use of differ...View AnswerShow Answer

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

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The French term "laissez-faire" means

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(Consider This) Today, South Korea's economy

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 per unit of labor were to increase from $2 to $3, the most eﬃcient production technique Would then be

Correct AnswerverifiedShow Answer

On the basis of the information, it can be said that

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

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Economic proﬁts in an industry suggest the industry

Correct AnswerverifiedShow Answer

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the

Correct AnswerverifiedShow Answer

The invisible hand promotes society's interests because

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The market system is also known as ___, while the command system is also known as _____.

Correct AnswerverifiedShow Answer

The economies of North Korea and Cuba are

Correct AnswerverifiedShow Answer

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

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

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Human specialization makes use of differ...
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The market system is also known as _, while the command system is also known as ___.

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