Exam 2: The Market System and the Circular Flow

A) comes closest to using the same quantities of land, labour, capital, and entrepreneurial ability.
B) can be obtained for the smallest money outlay.
C) uses the smallest total quantity of all resources.
D) conserves most on the use of labour.

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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 above means.

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A) the number of industries expanded.
B) less quantitative targets were assigned to each industry.
C) planning techniques improved.
D) production cost decreased.

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A) changes in product demands are only randomly reflected in changes in the demands for resources.
B) profit maximization is inconsistent with an efficient allocation of resources.
C) government action is necessary to correct for market failures.
D) when firms maximize their profits, society's domestic output will also be maximized.

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A) use of capital goods.
B) entry and exit from the market.
C) large number of sellers.
D) coincidence of wants.

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A) businesses borrow money capital from households.
B) businesses sell services to households.
C) households sell resources to businesses.
D) firms sell raw materials to households.

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A) fact that our tax system redistributes income from rich to poor.
B) notion that, under competition, decisions motivated by self-interest promote the social interest.
C) tendency of monopolistic sellers to raise prices above competitive levels.
D) fact that government controls the functioning of the market system.

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

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A) comprised of both product and resource markets.
B) which engages in both domestic and international trade.
C) comprised of both extensive private markets and government involvement in the economy.
D) which functions primarily on the basis of custom and tradition.

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A) government licensing requirements in order to enter an industry
B) a small number of buyers and sellers in a market
C) the freedom of sellers and buyers to enter or exit an industry
D) the government serving as the only supplier of goods to consumers

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A) In a market system, buyers and sellers must be in face-to-face contact with each other.
B) Prices affect the distribution of goods in a market system but not the allocation of resources.
C) In a market system, prices serve to ration goods and services to consumers.
D) The operation of a market system has little, if any, effect on the distribution of income in the economy.

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A) What will be produced?
B) How will the goods and services be produced?
C) How will the system accommodate change?
D) Who is to receive the output?

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A) What will be produced?
B) How will the goods and services be produced?
C) How will the system accommodate change?
D) Who is to receive the output?

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A) In a mixed economy, society determines production and the allocation of goods and services only through the market system.
B) In a mixed economy, government policies determine the production and the allocation of goods and services, but each individual is free to pursue his or her own self-interest.
C) In a mixed economy, the government and private sectors interact in determining production and allocation of goods and services.
D) In a mixed economy, the role of individual self-interest is relatively unimportant because government makes most of the economic decisions.

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

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A) expand, product price will rise, and losses will tend to disappear.
B) contract, product price will fall, and losses will increase.
C) contract, product price will rise, and losses will tend to disappear.
D) expand, product price will fall, and losses will tend to disappear.

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A) promote the concentration of economic power in the business sector.
B) facilitate exchange where a coincidence of wants does not exist.
C) better synchronize the operation of resource and product markets.
D) enhance future productive efficiency.

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