Question 1

Economic profits and losses

Accepted Answer

A)  are both considered by economists to be a part of production costs.
B)  are essential to the reallocation of resources from less desired to more desired goods.
C)  have no influence on the composition of domestic output.
D)  equalize the distribution of income in the long run.E) A) and D)
F) B) and C)

Question 2

Which of the following is a characteristic of a corporation?

Accepted Answer

A)  It is an independent legal entity on its own.
B)  The owners bear all the responsibility of the business's debts.
C)  It is owned and managed by one person.
D)  The 2 owners pool their business talents to run the business.E) C) and D)
F) None of the above

Question 3

Of the following countries, which one best exhibits the characteristics of a market economy?

Accepted Answer

A)  Canada
B)  Cuba
C)  North Korea
D)  BelarusE) None of the above
F) A) and D)

Question 4

The use of money for exchange and trade

Accepted Answer

A)  increases the importance of barter.
B)  fosters more specialization in production.
C)  reduces consumer sovereignty.
D)  raises the need for a coincidence of wants.E) A) and B)
F) B) and C)

Question 5

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

Question 6

Explain what is meant by a command economy.

Accepted Answer

A method of organizing an economy in whi...

Question 7

Which is one of the five fundamental questions that need to be dealt with in any economic system?

Accepted Answer

A)  What makes the rate of unemployment low?
B)  Who will be the richest group in the economy?
C)  How will goods and services be produced?
D)  How high should the prices of goods and services be?E) A) and B)
F) None of the above

Question 8

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 of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Accepted Answer

A)  loss of $2 to a loss of $1.
B)  profit of $2 to a profit of $1.
C)  profit of $1 to a profit of $2.
D)  loss of $1 to a loss of $2.E) A) and B)
F) None of the above

Question 9

The economy of the United States can best be described as laissez-faire capitalism.

Accepted Answer

A) True 
 B)False

Question 10

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 systemE) A) and B)
F) A) and C)

Question 11

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

Question 12

If consumer desire for product X increases, all of the following will occur except

Accepted Answer

A)  an increase in the profits of industry X.
B)  an increase in the quantity of resources employed by industry X.
C)  an increase in the output of industry X.
D)  a decrease in the quantity of resources employed in industry X.E) A) and B)
F) None of the above

Question 13

"Consumer sovereignty" means that

Accepted Answer

A)  buyers can dictate the prices at which goods and services will be offered.
B)  advertising is ineffective because consumers already know what they want.
C)  buyers control the quality of goods and services through regulatory agencies.
D)  buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.E) A) and C)
F) None of the above

Question 14

The wants of consumers are expressed in the product market with "dollar votes."

Accepted Answer

A) True 
 B)False

Question 15

Answer the question based on the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively.  Which technique is economically most efficient in producing A?

Accepted Answer

A)  I
B)  II
C)  III
D)  IVE) None of the above
F) All of the above

Question 16

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) None of the above
F) All of the above

Question 17

College graduates who dislike business risk will mostly seek to be hired by firms as labor, rather than starting their own firms as entrepreneurs.

Accepted Answer

A) True 
 B)False

Question 18

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

Accepted Answer

A)  "Those most willing and able to pay for them."
B)  "Those who physically produced them."
C)  "Those who most need them."
D)  "Those who get utility from them."E) B) and C)
F) A) and B)

Question 19

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown.  Which technique is the most economically efficient?

Accepted Answer

A)  Technique I with total costs of $14
B)  Technique II with total costs of $15
C)  Technique III with total costs of $14
D)  Technique I with total costs of $19E) A) and B)
F) A) and C)

Question 20

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of

Accepted Answer

A)  derived demand.
B)  consumer sovereignty.
C)  the invisible hand.
D)  market failure.E) B) and D)
F) All of the above

Exam 2: The Market System and the Circular Flow

Explain what is meant by a command economy.

Correct AnswerverifiedA method of organizing an economy in whi...View AnswerShow Answer

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of

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

Correct AnswerverifiedShow Answer

Economic profits and losses

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

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College graduates who dislike business risk will mostly seek to be hired by firms as labor, rather than starting their own firms as entrepreneurs.

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If consumer desire for product X increases, all of the following will occur except

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An increase in consumer desire for strawberries is most likely to

Correct AnswerverifiedShow Answer

The economy of the United States can best be described as laissez-faire capitalism.

Correct AnswerverifiedShow Answer

Of the following countries, which one best exhibits the characteristics of a market 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 of labor increases from $2 to $3, then the results of using Technique C will change from an economic

Correct AnswerverifiedShow Answer

Examples of command economies are

Correct AnswerverifiedShow Answer

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown. Which technique is the most economically efficient?

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Which of the following is a characteristic of a corporation?

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Answer the question based on the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively. Which technique is economically most efficient in producing A?

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The wants of consumers are expressed in the product market with "dollar votes."

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The use of money for exchange and trade

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"Consumer sovereignty" means that

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Which is one of the five fundamental questions that need to be dealt with in any economic system?

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The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

Correct AnswerverifiedShow Answer

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A method of organizing an economy in whi...
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The market system is also known as _, while the command system is also known as ___.

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