Question 1

Explain the term "laissez faire capitalism."

Accepted Answer

This is a hypothetical economic system i...

Question 2

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 sovereigntyE) A) and D)
F) B) and C)

Question 3

The use of money contributes to economic eﬃciency because

Accepted Answer

A)   governmental direction of the production and distribution of output can be avoided by using money.
B)   roundabout production could not occur without the availability of money.
C)   it is necessary for the creation of capital goods.
D)   it promotes specialization by overcoming the problems with barter.E) None of the above
F) A) and B)

Question 4

All of the following statements describe a market economy except

Accepted Answer

A)   government prescribes the market prices for goods and services.
B)   prices provide important signals to buyers and sellers.
C)   the allocation of resources is determined by their prices.
D)   the actions of buyers and sellers establish a product's price.E) A) and D)
F) A) and C)

Question 5

The Heritage Foundation in 2018 ranked which of the following economies to have the highest economic freedom?

Accepted Answer

A)   the United States
B)   Germany
C)   Japan
D)   Hong KongE) A) and C)
F) A) and B)

Question 6

If competitive industry Z is making substantial economic proﬁt, output will

Accepted Answer

A)   fall in industry Z and ﬁrms will likely leave the market.
B)   fall in all industries except industry Z.
C)   expand in industry Z, as more resources will move to that industry.
D)   expand in industry Z, but no new ﬁrms will enter the market.E) All of the above
F) A) and B)

Question 7

Economic systems differ from one another based on who owns the factors of production and

Accepted Answer

A)   how many resources are available in the economy and where they are located.
B)   how economic activities are coordinated and directed.
C)   what kinds of products are produced in the economy and how they are sold.
D)   how big the population is and the makeup of the population.E) A) and C)
F) None of the above

Question 8

One of the most important economic resources is money.

Accepted Answer

A) True 
 B)False

Question 9

On the basis of the information, and assuming trade occurs between the three states, we can expect

Accepted Answer

A)   Washington to exchange apples with Texas and receive money in return.
B)   Washington to exchange apples with Michigan and receive money in return.
C)   Texas to exchange lettuce with Michigan and receive autos in return.
D)   Texas to trade lettuce directly for Washington apples.E) A) and C)
F) B) and C)

Question 10

In the resource market,

Accepted Answer

A)   businesses borrow ﬁnancial capital from households.
B)   businesses sell services to households.
C)   households sell resources to businesses.
D)   ﬁrms sell raw materials to households.E) All of the above
F) B) and C)

Question 11

Private property and freedom of choice in a market system have the following implications, except

Accepted Answer

A)   individuals are free to take on the ﬁnancial risks involved in a business.
B)   trades that take place in the economy are mutually agreeable transactions among individuals.
C)   economic agents can act in their own self-interest.
D)   large ﬁrms are allowed to coerce other ﬁrms and individuals.E) B) and D)
F) A) and B)

Question 12

In a market system, the income earned by owners of natural resources is called interest income.

Accepted Answer

A) True 
 B)False

Question 13

Describe two types of specialization in production.

Accepted Answer

One type of specialization is human spec...

Question 14

If the total costs of producing 1,500 units of output is $15,000 and this output sold to consumers for a total of $16,500, then the ﬁrm would earn economic proﬁts of

Accepted Answer

A)   $31,500.
B)   $16,500.
C)   $1,500.
D)   $15,000.E) A) and B)
F) A) and C)

Question 15

An increase in consumer desire for strawberries is most likely to

Accepted Answer

A)   increase the number of strawberry pickers needed by farmers.
B)   reduce the supply of strawberries.
C)   reduce the number of people willing to pick strawberries.
D)   reduce the need for strawberry pickers.E) A) and B)
F) B) and C)

Question 16

Copyrights and trademarks are examples of

Accepted Answer

A)   capital goods.
B)   human capital.
C)   property rights.
D)   public goods.E) None of the above
F) A) and D)

Question 17

Competition in a market system denotes a condition where

Accepted Answer

A)   the diffusion of economic power limits its potential abuse.
B)   any given product can be purchased at a wide range of prices.
C)   contractual agreements among individual ﬁrms are restricted and avoided.
D)   a few large, dominant sellers are constantly jostling for market share.E) B) and D)
F) C) and D)

Question 18

Broadly deﬁned, competition involves

Accepted Answer

A)   private property and freedom of expression.
B)   independently acting buyers and sellers and freedom to enter or leave markets.
C)   increasing opportunity costs and diminishing marginal utility.
D)   capital goods and division of labor.E) B) and C)
F) A) and D)

Question 19

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without
Markets and proﬁts." This quotation best identiﬁes the

Accepted Answer

A)   incentive problem under central planning.
B)   coordination problem under central planning.
C)   self-suﬃciency dilemma under communism.
D)   resource overcommitment problem under communism.E) None of the above
F) B) and D)

Question 20

(Consider This)  Which of the following is not a consequence of government subsidized ﬂood insurance?

Accepted Answer

A)   More people will choose to live in areas susceptible to ﬂooding.
B)   Taxpayers will have to help pay for the rebuilding of ﬂooded properties.
C)   It makes actual risks of ﬂooding look artiﬁcially low.
D)   More people will choose to live and work on higher ground.E) None of the above
F) C) and D)

Exam 2: The Market System and the Circular Flow

An increase in consumer desire for strawberries is most likely to

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(Consider This) Which of the following is not a consequence of government subsidized ﬂood insurance?

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Copyrights and trademarks are examples of

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If competitive industry Z is making substantial economic proﬁt, output will

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In a market system, the income earned by owners of natural resources is called interest income.

Correct AnswerverifiedShow Answer

One of the most important economic resources is money.

Correct AnswerverifiedShow Answer

Competition in a market system denotes a condition where

Correct AnswerverifiedShow Answer

The Heritage Foundation in 2018 ranked which of the following economies to have the highest economic freedom?

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Explain the term "laissez faire capitalism."

Correct AnswerverifiedThis is a hypothetical economic system i...View AnswerShow Answer

Broadly deﬁned, competition involves

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In the resource market,

Correct AnswerverifiedShow Answer

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without Markets and proﬁts." This quotation best identiﬁes the

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All of the following statements describe a market economy except

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On the basis of the information, and assuming trade occurs between the three states, we can expect

Correct AnswerverifiedShow Answer

The use of money contributes to economic eﬃciency because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Economic systems differ from one another based on who owns the factors of production and

Correct AnswerverifiedShow Answer

Describe two types of specialization in production.

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

Private property and freedom of choice in a market system have the following implications, except

Correct AnswerverifiedShow Answer

If the total costs of producing 1,500 units of output is $15,000 and this output sold to consumers for a total of $16,500, then the ﬁrm would earn economic proﬁts of

Correct AnswerverifiedShow Answer

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This is a hypothetical economic system i...
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One type of specialization is human spec...
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