Question 1

Answer the question based on the following information: Suppose 10 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.  If the price of product A is $1.00, and the firm is producing efficiently the firm will realize

Accepted Answer

A)  Economic profit of $10.
B)  Economic profit of $23.
C)  Economic loss of $13.
D)  Economic loss of $3.
E)  Economic profit of $3.F) A) and E)
G) B) and D)

Question 2

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 B)
F) A) and C)

Question 3

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 4

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Accepted Answer

A)  It encourages more people to become entrepreneurs.
B)  Firms have to pay more to attract inputs, as these inputs have to share the risk.
C)  Firms focus attention on prudent risk management, as it is profitable to manage risk.
D)  Income becomes more equally distributed.E) All of the above
F) A) and D)

Question 5

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

Question 6

An important aspect of the market system is that producers and consumers always have to consider the public interest in making production and consumption decisions.

Accepted Answer

A) True 
 B)False  False

Question 7

List nine characteristics of the market system.

Accepted Answer

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

Question 8

What are the two main problems that have caused the demise of the command systems?

Accepted Answer

The first difficulty was the coordinatio...

Question 9

The "invisible hand" concept refers to the

Accepted Answer

A)  guiding function of prices in a market system.
B)  implicit influence that the government has on the actions of firms.
C)  regulatory structure that markets must operate in.
D)  underlying money flows that promote the trading of goods and services.E) C) and D)
F) None of the above

Question 10

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

Accepted Answer

A) True 
 B)False

Question 11

Describe three ways that human specialization contributes to society's output.

Accepted Answer

Human specialization makes use of differ...

Question 12

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity.  If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land, 3 of labor, 1 of capital, and 2 of entrepreneurial ability, this technique would

Accepted Answer

A)  not be adopted because, although it reduces production costs, it does not increase profit.
B)  be adopted because it would lower production costs and increase economic profit.
C)  not be adopted because it entails higher production costs than other available techniques.
D)  be adopted, even though economic profits would be reduced slightly.E) B) and C)
F) A) and B)

Question 13

Firms are motivated to minimize production costs because

Accepted Answer

A)  it is the most environmentally friendly way to produce goods.
B)  least-cost production techniques use the smallest total quantity of resources.
C)  competitive pressures in the market will drive out higher-cost producers.
D)  the government provides tax credits and subsidies to low-cost producers.E) C) and D)
F) B) and C)

Question 14

The "coincidence of wants" problem associated with barter refers to the fact that

Accepted Answer

A)  for exchange to occur, each seller must have a product that some buyer wants.
B)  money must be used as a medium of exchange or trade will never occur.
C)  specialization is restricted by the size or scope of a market.
D)  buyers in resource markets and sellers in product markets can never engage in exchange.E) C) and D)
F) None of the above

Question 15

Refer to the diagram. Flow 4 represents

Accepted Answer

A)  wage, rent, interest, and profit income.
B)  land, labor, capital, and entrepreneurial ability.
C)  goods and services.
D)  consumer expenditures and business revenue.E) A) and B)
F) A) and C)

Question 16

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

Accepted Answer

A)  the laissez-faire economy
B)  pure capitalism
C)  a mixed-market economy
D)  macroeconomic systemsE) A) and D)
F) A) and C) C

Question 17

If products were in short or surplus supply in the Soviet Union,

Accepted Answer

A)  price and profit signals eliminated those shortages and surpluses.
B)  price and profit signals intensified those shortages and surpluses.
C)  producers would not react because no price or profit signals occurred.
D)  the planners would immediately adjust production to achieve equilibrium.E) A) and D)
F) B) and D)

Question 18

The two basic markets shown by the simple circular flow model are

Accepted Answer

A)  capital goods and consumer goods.
B)  competitive and regulated.
C)  product and resource.
D)  household and business.E) All of the above
F) A) and B)

Question 19

In a market system, employees and suppliers

Accepted Answer

A)  are usually shielded from risk, but at the cost of not sharing in the profits of the firm.
B)  are usually shielded from risk and share in the profits of the firm.
C)  are generally subject to as much risk as firm owners but get to share in the profits.
D)  bear as much risk as firm owners but don't get to share in the profits.E) All of the above
F) C) and D)

Question 20

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

Exam 2: The Market System and the Circular Flow

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Correct Answer
verified

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

Correct Answer
verified

An important aspect of the market system is that producers and consumers always have to consider the public interest in making production and consumption decisions.

Correct Answer
verified
False

List nine characteristics of the market system.

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

What are the two main problems that have caused the demise of the command systems?

Correct Answer
verified
The first difficulty was the coordinatio...
View Answer

The "invisible hand" concept refers to the

Correct Answer
verified

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

Correct Answer
verified

Describe three ways that human specialization contributes to society's output.

Correct Answer
verified
Human specialization makes use of differ...
View Answer

Correct Answer
verified

Firms are motivated to minimize production costs because

Correct Answer
verified

The "coincidence of wants" problem associated with barter refers to the fact that

Correct Answer
verified

Refer to the diagram. Flow 4 represents

Correct Answer
verified

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

Correct Answer
verified
C

If products were in short or surplus supply in the Soviet Union,

Correct Answer
verified

The two basic markets shown by the simple circular flow model are

Correct Answer
verified

In a market system, employees and suppliers

Correct Answer
verified

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

Correct Answer
verified
A

Exam 2: The Market System and the Circular Flow

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An important aspect of the market system is that producers and consumers always have to consider the public interest in making production and consumption decisions.

Correct AnswerverifiedFalse

List nine characteristics of the market system.

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

What are the two main problems that have caused the demise of the command systems?

Correct AnswerverifiedThe first difficulty was the coordinatio...View AnswerShow Answer

The "invisible hand" concept refers to the

Correct AnswerverifiedShow Answer

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

Correct AnswerverifiedShow Answer

Describe three ways that human specialization contributes to society's output.

Correct AnswerverifiedHuman specialization makes use of differ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Firms are motivated to minimize production costs because

Correct AnswerverifiedShow Answer

The "coincidence of wants" problem associated with barter refers to the fact that

Correct AnswerverifiedShow Answer

Refer to the diagram. Flow 4 represents

Correct AnswerverifiedShow Answer

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

Correct AnswerverifiedC

If products were in short or surplus supply in the Soviet Union,

Correct AnswerverifiedShow Answer

The two basic markets shown by the simple circular flow model are

Correct AnswerverifiedShow Answer

In a market system, employees and suppliers

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

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False

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The nine key features are: (1)private pr...
View Answer

Correct Answer
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The first difficulty was the coordinatio...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Human specialization makes use of differ...
View Answer

Correct Answer
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Correct Answer
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C

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A