Question 1

Anything that is generally acceptable in trading for goods and services is a

Accepted Answer

A)   medium of exchange.
B)   capital good.
C)   store of value.
D)   resource.E) C) and D)
F) B) and D)

Question 2

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) A) and C)

Question 3

In a market system, which of the following will eliminate high-cost producers and allow only the low-cost producers to survive?

Accepted Answer

A)   competition
B)   money
C)   a sovereign government
D)   specializationE) B) and C)
F) A) and B)

Question 4

The development of the digital video camera, which replaced film video cameras, is an example of

Accepted Answer

A)   roundabout production.
B)   derived demand.
C)   creative destruction.
D)   specialization.E) None of the above
F) A) and C)

Question 5

The coordination problem in the centrally planned economies refers to the idea that

Accepted Answer

A)   planners had to direct required inputs to each enterprise.
B)   the price level and the level of employment were inversely related.
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) A) and B)
F) A) and C)

Question 6

Innovation lagged in the centrally planned economies because

Accepted Answer

A)   there was too much domestic business competition.
B)   there was too much competition from foreign firms.
C)   enterprises resisted innovation in fear that their production targets would be raised.
D)   exports had to equal imports for the plan to work.E) A) and B)
F) B) and C)

Question 7

Risk management in command economies

Accepted Answer

A)   is easy because there is no risk.
B)   is easy because the government controls most activity and can eliminate risk.
C)   tends to be done poorly because government officials do not understand risk.
D)   tends to be done poorly because decision makers are insulated from the risk of making a poor decision.E) A) and B)
F) B) and C)

Question 8

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

Question 9

From society's point of view, the economic function of profits and losses is to

Accepted Answer

A)   promote the equal distribution of real assets and wealth.
B)   achieve full employment and price level stability.
C)   contribute to a more equal distribution of income.
D)   reallocate resources from less-desired to more-desired uses.E) All of the above
F) A) and B)

Question 10

(Consider This)  In 2013, McDonald's introduced Fish McBites, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of

Accepted Answer

A)   consumer sovereignty.
B)   technological change.
C)   downsloping demand.
D)   specialization.E) A) and B)
F) A) and C)

Question 11

In a market system,

Accepted Answer

A)   firm owners and employees share business risk more or less equally.
B)   a firm's employees and suppliers are largely shielded from risk, relative to business owners.
C)   employees and suppliers face the greatest risks, because firms can shut down without notice and leave them unpaid.
D)   a firm's owners are largely shielded from risk because they can walk away from the business at any time.E) A) and C)
F) None of the above

Question 12

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) None of the above
F) A) and C)

Question 13

The guiding function of prices tends to keep resources flowing toward their most highly valued uses.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would be primarily determined in the resource markets?

Accepted Answer

A)   the airfares charged by airlines for family vacations
B)   the wage rates for computer programmers and engineers
C)   the number of home-Internet connections installed
D)   the amount of money in circulation issued by the governmentE) B) and C)
F) All of the above

Question 15

In a market system, resources will move away from an industry when

Accepted Answer

A)   profits of firms in the industry are rising.
B)   demand for the industry's product is decreasing.
C)   the production of output in the industry is rising.
D)   profits of firms in other industries are falling.E) A) and D)
F) B) and C)

Question 16

Competition means that

Accepted Answer

A)   sellers can manipulate market price by causing product scarcities.
B)   there are independently acting buyers and sellers in each market.
C)   a product can be purchased at a number of different prices.
D)   there is more than one seller in a market.E) A) and B)
F) A) and C)

Question 17

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) All of the above
F) B) and C)

Question 18

Which of the following would not be emphasized in a capitalist economy?

Accepted Answer

A)   private ownership of capital and other resources
B)   competition and decentralized decisions regarding production and consumption
C)   reliance on market forces to coordinate economic activity
D)   prevention of firms from exposing themselves to financial riskE) None of the above
F) A) and B)

Question 19

Laissez-faire capitalism is characterized by

Accepted Answer

A)   very limited government role in the economy.
B)   active government intervention in the economy.
C)   individuals and firms abiding by a government economic plan.
D)   the economic system of the United States today.E) B) and C)
F) A) and D)

Question 20

Businesses seeking higher profits and resource suppliers seeking higher incomes lead to changes in the allocation of resources among different firms and end up with

Accepted Answer

A)   consumers at the losing end.
B)   output that society wants.
C)   unnecessary conflict and turmoil.
D)   a need for government action.E) C) and D)
F) B) and D)

Exam 2: The Market System and the Circular Flow

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

Correct AnswerverifiedShow Answer

Competition means that

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Which of the following would be primarily determined in the resource markets?

Correct AnswerverifiedShow Answer

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

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The coordination problem in the centrally planned economies refers to the idea that

Correct AnswerverifiedShow Answer

Anything that is generally acceptable in trading for goods and services is a

Correct AnswerverifiedShow Answer

In a market system,

Correct AnswerverifiedShow Answer

From society's point of view, the economic function of profits and losses is to

Correct AnswerverifiedShow Answer

Economic profits and losses

Correct AnswerverifiedShow Answer

Businesses seeking higher profits and resource suppliers seeking higher incomes lead to changes in the allocation of resources among different firms and end up with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a market system, resources will move away from an industry when

Correct AnswerverifiedShow Answer

(Consider This) In 2013, McDonald's introduced Fish McBites, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of

Correct AnswerverifiedShow Answer

Innovation lagged in the centrally planned economies because

Correct AnswerverifiedShow Answer

Laissez-faire capitalism is characterized by

Correct AnswerverifiedShow Answer

In a market system, which of the following will eliminate high-cost producers and allow only the low-cost producers to survive?

Correct AnswerverifiedShow Answer

Risk management in command economies

Correct AnswerverifiedShow Answer

The guiding function of prices tends to keep resources flowing toward their most highly valued uses.

Correct AnswerverifiedShow Answer

The development of the digital video camera, which replaced film video cameras, is an example of

Correct AnswerverifiedShow Answer

Which of the following would not be emphasized in a capitalist economy?

Correct AnswerverifiedShow Answer

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