Question 1

The choice of the most eﬃcient production technique is not affected by how much buyers want to buy
the product.

Accepted Answer

A) True 
 B)False

Question 2

In a market system, the distribution of goods and services largely depends on the distribution of income
and people's preferences.

Accepted Answer

A) True 
 B)False  True

Question 3

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.E) B) and C)
F) A) and D)

Question 4

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because

Accepted Answer

A)   production targets were often increased when innovation occurred.
B)   there was a chronic shortage of computers.
C)   workers could not be reallocated geographically.
D)   innovations ordinarily increased dependence on world markets.E) A) and B)
F) A) and C)

Question 5

Which of the following 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 wantsE) A) and D)
F) A) and B)

Question 6

(Consider This) Explain the differences in economic systems between North and South Korea and the
economic outcomes of the two systems.

Accepted Answer

North Korea, under the inﬂuence of the S...

Question 7

A characteristic of centrally planned economies is that

Accepted Answer

A)   the price is relatively unimportant in allocating resources.
B)   proﬁts are the main measure of success of a ﬁrm.
C)   entrepreneurship is quite prevalent and highly rewarded.
D)   there are many incentives for innovation and hard work.E) A) and C)
F) C) and D)

Question 8

One essential trade-off involving business risk in a market system is reﬂected in which of the following statements?

Accepted Answer

A)   Access to the ﬁrm's proﬁts and gains are open only to those who take on the business risk of the ﬁrm.
B)   Those who receive guaranteed payments from the ﬁrm are also guaranteed a share of the ﬁrm's proﬁts.
C)   Those who make bad decisions regarding risk will suffer losses; those who decide wisely will gain proﬁts.
D)   Those who bear the business risk of the ﬁrm are guaranteed to always gain proﬁts.E) A) and B)
F) None of the above

Question 9

The invisible hand refers to the

Accepted Answer

A)   fact that the U.S. 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.E) A) and B)
F) All of the above

Question 10

The invisible hand refers to the many indirect controls that the federal government imposes in a market
system.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about markets and prices is correct?

Accepted Answer

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.E) A) and B)
F) All of the above

Question 12

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

Accepted Answer

A)   "Through government leadership and direction."
B)   "Through the guiding function of prices and the incentive function of proﬁts."
C)   "Through training and retraining programs."
D)   "Through trial and error."E) B) and C)
F) A) and D)

Question 13

Which of the following is not one of the ﬁve fundamental questions that an economy must deal with?

Accepted Answer

A)   How will the goods and services be produced?
B)   Why should the goods and services be produced?
C)   Who is to receive the goods and services produced in the economy?
D)   In what ways will progress be promoted?E) B) and C)
F) A) and B)

Question 14

List nine characteristics of the market system.

Accepted Answer

The nine key features are: (1) private p...

Question 15

Money functions as a medium of exchange by eliminating the need for a coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 16

Freedom of enterprise

Accepted Answer

A)   is a characteristic that is common to most economic systems.
B)   in a market system means that entrepreneurs can obtain and use economic resources without any legal restraint.
C)   allows businesses, within broad limits, to choose what goods to produce.
D)   refers primarily to the right of consumers to purchase what they want.E) A) and B)
F) All of the above

Question 17

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

Accepted Answer

Consumers register their preferences for the type and quantity of goods and services they want in the
market when they buy something. The dollars spent are like voting for that product to continue to be
produced. If the dollar votes for a certain product are great enough to create a proﬁt, businesses will
produce and sell that product. In contrast, if the dollar votes do not create suﬃcient revenues to cover
costs, businesses will not produce the product. Thus, consumers collectively direct resources to
industries that are meeting their wants and away from industries that are not meeting their wants.

Question 18

A production system where various workers concentrate on different specialized tasks to contribute toward a whole product is referred to as

Accepted Answer

A)   a coincidence of wants.
B)   roundabout production.
C)   freedom of enterprise.
D)   division of labor.E) B) and C)
F) A) and D)

Question 19

The incentive problem under communist central planning refers to the idea that

Accepted Answer

A)   planners had to direct required inputs to each enterprise.
B)   workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
C)   the immediate effect of more investment was less consumption.
D)   exports had to be equal to imports for a central plan to work.E) All of the above
F) A) and D) B

Question 20

Describe the three major virtues of a market system.

Accepted Answer

The three major virtues of the market sy...

Exam 2: The Market System and the Circular Flow

The choice of the most eﬃcient production technique is not affected by how much buyers want to buy the product.

Correct Answer
verified

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Correct Answer
verified
True

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

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because

Correct Answer
verified

Which of the following is necessary to make a trade in a barter economy?

Correct Answer
verified

(Consider This) Explain the differences in economic systems between North and South Korea and the economic outcomes of the two systems.

Correct Answer
verified
North Korea, under the inﬂuence of the S...
View Answer

A characteristic of centrally planned economies is that

Correct Answer
verified

One essential trade-off involving business risk in a market system is reﬂected in which of the following statements?

Correct Answer
verified

The invisible hand refers to the

Correct Answer
verified

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

Correct Answer
verified

Which of the following statements about markets and prices is correct?

Correct Answer
verified

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

Correct Answer
verified

Which of the following is not one of the ﬁve fundamental questions that an economy must deal with?

Correct Answer
verified

List nine characteristics of the market system.

Correct Answer
verified
The nine key features are: (1) private p...
View Answer

Money functions as a medium of exchange by eliminating the need for a coincidence of wants.

Correct Answer
verified

Freedom of enterprise

Correct Answer
verified

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

A production system where various workers concentrate on different specialized tasks to contribute toward a whole product is referred to as

Correct Answer
verified

The incentive problem under communist central planning refers to the idea that

Correct Answer
verified
B

Describe the three major virtues of a market system.

Correct Answer
verified
The three major virtues of the market sy...
View Answer

Exam 2: The Market System and the Circular Flow

The choice of the most eﬃcient production technique is not affected by how much buyers want to buy the product.

Correct AnswerverifiedShow Answer

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Correct AnswerverifiedTrue

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

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because

Correct AnswerverifiedShow Answer

Which of the following is necessary to make a trade in a barter economy?

Correct AnswerverifiedShow Answer

(Consider This) Explain the differences in economic systems between North and South Korea and the economic outcomes of the two systems.

Correct AnswerverifiedNorth Korea, under the inﬂuence of the S...View AnswerShow Answer

A characteristic of centrally planned economies is that

Correct AnswerverifiedShow Answer

One essential trade-off involving business risk in a market system is reﬂected in which of the following statements?

Correct AnswerverifiedShow Answer

The invisible hand refers to the

Correct AnswerverifiedShow Answer

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

Correct AnswerverifiedShow Answer

Which of the following statements about markets and prices is correct?

Correct AnswerverifiedShow Answer

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

Correct AnswerverifiedShow Answer

Which of the following is not one of the ﬁve fundamental questions that an economy must deal with?

Correct AnswerverifiedShow Answer

List nine characteristics of the market system.

Correct AnswerverifiedThe nine key features are: (1) private p...View AnswerShow Answer

Money functions as a medium of exchange by eliminating the need for a coincidence of wants.

Correct AnswerverifiedShow Answer

Freedom of enterprise

Correct AnswerverifiedShow Answer

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

A production system where various workers concentrate on different specialized tasks to contribute toward a whole product is referred to as

Correct AnswerverifiedShow Answer

The incentive problem under communist central planning refers to the idea that

Correct AnswerverifiedB

Describe the three major virtues of a market system.

Correct AnswerverifiedThe three major virtues of the market sy...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
North Korea, under the inﬂuence of the S...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The nine key features are: (1) private p...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified
The three major virtues of the market sy...
View Answer