Question 1

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by:

Accepted Answer

A)   The state and government
B)   Markets and prices
C)   A central planning agency
D)   An international organizationE) A) and B)
F) A) and C)

Question 2

In a command economy, the head of each household makes the fundamental economic choices such as what to produce and how to produce output.

Accepted Answer

A) True 
 B)False

Question 3

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the:

Accepted Answer

A)   Guiding function of prices
B)   Monetary function of prices
C)   Circular flow of income
D)   Market determination of pricesE) A) and B)
F) A) and C)

Question 4

The market system is an economic system that:

Accepted Answer

A)   Produces more consumer goods than capital goods
B)   Produces more capital goods than consumer goods
C)   Gives private individuals the right to own resources used in production
D)   Emphasizes the government's power to control markets and direct economic activityE) None of the above
F) B) and C)

Question 5

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 economyE) A) and D)
F) All of the above

Question 6

A characteristic of the market system is:

Accepted Answer

A)   Extensive use of direct methods of production
B)   A focus on labor, as opposed to capital resources
C)   Reliance on the use of capital goods to expand total output
D)   Avoidance of producing goods that do not satisfy consumer wants directlyE) A) and B)
F) A) and C)

Question 7

Competition is more likely to exist when:

Accepted Answer

A)   There is easy entry into and exit out of industries
B)   A government-issued license is required to set up a firm in an industry
C)   The government purchases most goods and services
D)   Economic power is concentrated among a few large firmsE) C) and D)
F) A) and B)

Question 8

In the circular flow model of the market system, households:

Accepted Answer

A)   Buy products and resources
B)   Sell products and resources
C)   Buy products and sell resources
D)   Sell products and buy resourcesE) A) and B)
F) All of the above

Question 9

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

Accepted Answer

A)   A coincidence of wants
B)   Roundabout production
C)   Freedom of enterprise
D)   Division of laborE) B) and C)
F) C) and D)

Question 10

The term dollar votes in a market system means:

Accepted Answer

A)   Inflation will occur if consumers don't spend wisely
B)   Voters may be offered dollars to help elect certain political candidates
C)   Government is responsible for determining what will be considered legal tender
D)   Consumers "vote" for certain products to be produced by how they spend their incomesE) A) and D)
F) B) and C)

Question 11

McDonald's introduced the "Big Mac" in 1968 and it turned out to be a hit, but the "Arch Deluxe" introduced in 1996 was not. The success or failure of a product in the market system is determined by:

Accepted Answer

A)   Capitalism and entrepreneurship
B)   Specialization and exchange
C)   Consumer sovereignty and dollar votes
D)   Capital goods and roundabout productionE) C) and D)
F) A) and C)

Question 12

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Accepted Answer

A)   What will be produced?
B)   How will the output to be produced?
C)   How will the system accommodate change?
D)   Who will get the output?E) B) and C)
F) None of the above

Question 13

An economic system in which money is not used is a:

Accepted Answer

A)   Planned economy
B)   Market economy
C)   Mixed economy
D)   Barter economyE) All of the above
F) B) and D)

Question 14

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) None of the above
F) All of the above

Question 15

Which of the following is assumed to be most limited in scope under a market system?

Accepted Answer

A)   Entrepreneurship
B)   Self-interest
C)   Competition
D)   GovernmentE) A) and D)
F) A) and C)

Question 16

One of the most important economic resources is money.

Accepted Answer

A) True 
 B)False

Question 17

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.  Refer to the above table. If the price per unit of labor were to increase from $2 to $3, the most efficient production technique would then be:

Accepted Answer

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

Question 18

Which of the following statements about self-interest in a market system is false?

Accepted Answer

A)   Self-interest usually motivates an individual to deliver something of value to others
B)   Self-interest of entrepreneurs implies seeking maximum profits or minimum losses
C)   Self-interest applies only to capitalists and entrepreneurs, not to workers employed by others
D)   In a market system, consumers are just like firms: self-interest is what motivates themE) A) and B)
F) A) and C)

Question 19

The major virtues of the market system include all of the following, except:

Accepted Answer

A)   It promotes an efficient allocation of resources
B)   It leads to equality in the distribution of income
C)   It provides incentives for greater production and higher incomes
D)   It emphasizes the freedom to pursue self-interestE) A) and B)
F) None of the above

Question 20

Which of the following is not a major category of business structure?

Accepted Answer

A)   Sole proprietorship
B)   Partnership
C)   Public agency
D)   CorporationE) All of the above
F) A) and B)

Exam 2: The Market System and the Circular Flow

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

Correct AnswerverifiedShow Answer

The major virtues of the market system include all of the following, except:

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The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. Refer to the above table. If the price per unit of labor were to increase from $2 to $3, the most efficient production technique would then be:

Correct AnswerverifiedShow Answer

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Correct AnswerverifiedShow Answer

One of the most important economic resources is money.

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In the circular flow model of the market system, households:

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A characteristic of the market system is:

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The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the:

Correct AnswerverifiedShow Answer

Competition is more likely to exist when:

Correct AnswerverifiedShow Answer

Which of the following statements about self-interest in a market system is false?

Correct AnswerverifiedShow Answer

Which of the following is not a major category of business structure?

Correct AnswerverifiedShow Answer

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by:

Correct AnswerverifiedShow Answer

Which of the following is assumed to be most limited in scope under a market system?

Correct AnswerverifiedShow Answer

An economic system in which money is not used is a:

Correct AnswerverifiedShow Answer

The term dollar votes in a market system means:

Correct AnswerverifiedShow Answer

McDonald's introduced the "Big Mac" in 1968 and it turned out to be a hit, but the "Arch Deluxe" introduced in 1996 was not. The success or failure of a product in the market system is determined by:

Correct AnswerverifiedShow Answer

The market system is an economic system that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a command economy, the head of each household makes the fundamental economic choices such as what to produce and how to produce output.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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