Question 1

Which statement best describes a capitalist economy?

Accepted Answer

A)   Society determines production and the allocation of goods and services only through markets.
B)   Government policies determine the production and the allocation of goods and services.
C)   Government policies determine the production,but not the allocation,of goods and services.
D)   The role of individual self-interest is relatively unimportant because government makes most economic decisions.

Question 2

Markets in which firms sell their output of goods and services are called:

Accepted Answer

A)   resource markets.
B)   product markets.
C)   command markets.
D)   mixed markets.

Question 3

Economic efficiency entails getting the smallest amount of output from a given level of input of scarce resources.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the above figure.If flow (1) is the cost businesses pay to the resource market,then:

Accepted Answer

A)   (2) is the flow of productive resources.
B)   (4) is the flow of goods and services.
C)   (6) is the flow of money income.
D)   (7) is the flow of revenue.

Question 5

Which of the following does not explain why specialization increases output?

Accepted Answer

A)   Specialization capitalizes on differences in ability.
B)   Specialization promotes self-sufficiency and independence.
C)   Specialization fosters learning by doing.
D)   Specialization saves time by eliminating shifting between tasks.

Question 6

Which is not one of the Four Fundamental Questions?

Accepted Answer

A)   How will goods and services be produced?
B)   How should the system promote progress?
C)   Who is to receive the output of the system?
D)   What goods and services should be produced by government?

Question 7

Legal and social rules that affect the ownership of property are:

Accepted Answer

A)   property rights.
B)   the coincidence of wants.
C)   the division of labor.
D)   the freedom of enterprise. A

Question 8

The development of the Internet and e-mail to often replace regular mail services is an example of:

Accepted Answer

A)   roundabout production.
B)   derived demand.
C)   creative destruction.
D)   specialization. C

Question 9

A division of labor enhances society's output by permitting people to take advantage of existing differences in their abilities and skills.

Accepted Answer

A) True 
 B)False

Question 10

The money income of households consists of the sum of:

Accepted Answer

A)   wages plus salaries plus benefits.
B)   consumption expenditures plus profits.
C)   wages plus rents plus interest plus profits.
D)   consumption expenditures plus costs of resources.

Question 11

Property rights have a positive effect in a market economy because they encourage owners to maintain their property.

Accepted Answer

A) True 
 B)False

Question 12

The idea that the desires of resource suppliers and producers to further their own self-interest will automatically further the public interest is known as:

Accepted Answer

A)   consumer sovereignty.
B)   the invisible hand.
C)   derived demand.
D)   profit maximization. B

Question 13

A competitive economy assumes each industry consists of a:

Accepted Answer

A)   large number of small firms facing a large number of small buyers.
B)   few large firms facing a large number of small buyers.
C)   large number of small firms facing a few large buyers.
D)   few small firms facing a few small buyers.

Question 14

Individual property rights are the right of the government to own,use,and dispose of resources in an economy.

Accepted Answer

A) True 
 B)False

Question 15

In 1997,McDonald's introduced the "55-cent special." It turned out to be an unsuccessful product.In the marketplace for fast-food products,this lack of success is an example of:

Accepted Answer

A)   normal profit.
B)   economic costs.
C)   consumer sovereignty.
D)   medium of exchange.

Question 16

The process in which workers do specialized tasks to make a product is referred to as:

Accepted Answer

A)   a coincidence of wants.
B)   roundabout production.
C)   freedom of choice.
D)   division of labor.

Question 17

Which is necessary to make a trade in a barter economy?

Accepted Answer

A)   Money
B)   Unlimited wants
C)   A medium of exchange
D)   A coincidence of wants

Question 18

Capitalism is an economic system that:

Accepted Answer

A)   produces more capital goods than consumer goods.
B)   produces more consumer goods than capital goods.
C)   is characterized by government control of markets.
D)   gives private individuals and corporations the right to own productive resources.

Question 19

The "invisible hand" concept to describe the guiding function of prices was developed by:

Accepted Answer

A)   Jeremy Bentham.
B)   Adam Smith.
C)   Milton Friedman.
D)   David Ricardo.

Question 20

Specialization and trade are beneficial to society because:

Accepted Answer

A)   the output of economic goods may be increased with no increase in resources.
B)   scarce resources are utilized more efficiently.
C)   a division of labor lowers prices for products.
D)   all of the above are correct.

Exam 2: The Market System and the Circular Flow

Which statement best describes a capitalist economy?

Correct AnswerverifiedShow Answer

Markets in which firms sell their output of goods and services are called:

Correct AnswerverifiedShow Answer

Economic efficiency entails getting the smallest amount of output from a given level of input of scarce resources.

Correct AnswerverifiedShow Answer

Refer to the above figure.If flow (1) is the cost businesses pay to the resource market,then:

Correct AnswerverifiedShow Answer

Which of the following does not explain why specialization increases output?

Correct AnswerverifiedShow Answer

Which is not one of the Four Fundamental Questions?

Correct AnswerverifiedShow Answer

Legal and social rules that affect the ownership of property are:

Correct AnswerverifiedA

The development of the Internet and e-mail to often replace regular mail services is an example of:

Correct AnswerverifiedC

A division of labor enhances society's output by permitting people to take advantage of existing differences in their abilities and skills.

Correct AnswerverifiedShow Answer

The money income of households consists of the sum of:

Correct AnswerverifiedShow Answer

Property rights have a positive effect in a market economy because they encourage owners to maintain their property.

Correct AnswerverifiedShow Answer

The idea that the desires of resource suppliers and producers to further their own self-interest will automatically further the public interest is known as:

Correct AnswerverifiedB

A competitive economy assumes each industry consists of a:

Correct AnswerverifiedShow Answer

Individual property rights are the right of the government to own,use,and dispose of resources in an economy.

Correct AnswerverifiedShow Answer

In 1997,McDonald's introduced the "55-cent special." It turned out to be an unsuccessful product.In the marketplace for fast-food products,this lack of success is an example of:

Correct AnswerverifiedShow Answer

The process in which workers do specialized tasks to make a product is referred to as:

Correct AnswerverifiedShow Answer

Which is necessary to make a trade in a barter economy?

Correct AnswerverifiedShow Answer

Capitalism is an economic system that:

Correct AnswerverifiedShow Answer

The "invisible hand" concept to describe the guiding function of prices was developed by:

Correct AnswerverifiedShow Answer

Specialization and trade are beneficial to society because:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified