Question 1

Specialization-the division of labor-enhances productivity and efficiency by

Accepted Answer

A)   allowing workers to take advantage of existing differences in their abilities and skills.
B)   avoiding the time loss involved in shifting from one production task to another.
C)   allowing workers to develop skills by working on one, or a limited number, of tasks.
D)   all of the means identified in the other answers.E) A) and D)
F) None of the above

Question 2

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

Question 3

Which of the following is true of an economy that operates entirely through central planning?
A. An individual‘s success in business is based on political savvy rather than economic profitability.
B. There is relative ease in matching resource allocation to consumer demand by the central planners.
C. Central planners receive market information and coordinate economic activity through the price mechanism.
D. The system adapts easily to technological change, because there is a healthy entrepreneurial spirit.

Accepted Answer

The answer of Which of the following is true of...

Question 4

Quantitative measures of managerial success, such as production targets or quotas, are highly foolproof and are thus ideal to use in raising economic efficiency.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Accepted Answer

A)   Freakonomics.
B)   The Principles of Economics.
C)   The Age of the Economist.
D)   The Wealth of Nations.E) B) and C)
F) C) and D)

Question 7

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that

Accepted Answer

A)   product quality was neglected.
B)   production costs were minimized.
C)   product mix met consumer needs.
D)   technological advance was too rapid.E) B) and D)
F) A) and B)

Question 8

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Costs can be defined as total payments made to workers, landowners, and capital suppliers less payments to the entrepreneur for organizing and combining the other resources used to produce a good.

Accepted Answer

A) True 
 B)False

Question 11

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.

Accepted Answer

A) True 
 B)False

Question 12

An economic system

Accepted Answer

A)   requires a grouping of private markets linked to one another.
B)   is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
C)   requires some sort of centralized authority (such as government)  to coordinate economic activity.
D)   is a plan or scheme that allows a firm to make money at some other firm's expense.E) C) and D)
F) All of the above

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

Question 14

Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit.  Refer to the provided table. Which technique is the most economically efficient way of producing Zenia?

Accepted Answer

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

Question 15

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

Accepted Answer

A)   incentive problem under central planning.
B)   self-sufficiency dilemma under communism.
C)   resource overcommitment problem under communism.
D)   coordination problem under central planning.E) A) and B)
F) B) and D)

Question 16

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

Question 17

In the simple circular flow model,

Accepted Answer

A)   households are buyers of resources.
B)   businesses are sellers of final products.
C)   households are sellers of final products.
D)   there are real flows of goods, services, and resources, but not money flows.E) B) and D)
F) C) and D)

Question 18

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

Question 19

Which of the following is a fundamental characteristic of the market system?

Accepted Answer

A)   property rights
B)   central planning by government
C)   unselfish behavior
D)   government-set wages and pricesE) A) and B)
F) A) and C)

Question 20

In a market economy, a significant change in consumers' desire for product X will

Accepted Answer

A)   alter the profits or losses received by suppliers of product X.
B)   cause a reallocation of scarce resources.
C)   cause some industries to expand and others to contract.
D)   do all of the things mentioned in the other answers.E) B) and D)
F) All of the above

Exam 2: The Market System and the Circular Flow

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that

Correct Answer
verified

Specialization-the division of labor-enhances productivity and efficiency by

Correct Answer
verified

Quantitative measures of managerial success, such as production targets or quotas, are highly foolproof and are thus ideal to use in raising economic efficiency.

Correct Answer
verified

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Correct Answer
verified

Examples of command economies are

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

An economic system

Correct Answer
verified

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.

Correct Answer
verified

In a market economy, a significant change in consumers' desire for product X will

Correct Answer
verified

Costs can be defined as total payments made to workers, landowners, and capital suppliers less payments to the entrepreneur for organizing and combining the other resources used to produce a good.

Correct Answer
verified

In the simple circular flow model,

Correct Answer
verified

Firms are motivated to minimize production costs because

Correct Answer
verified

Which of the following is a fundamental characteristic of the market system?

Correct Answer
verified

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that

Correct AnswerverifiedShow Answer

Specialization-the division of labor-enhances productivity and efficiency by

Correct AnswerverifiedShow Answer

Quantitative measures of managerial success, such as production targets or quotas, are highly foolproof and are thus ideal to use in raising economic efficiency.

Correct AnswerverifiedShow Answer

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Correct AnswerverifiedShow Answer

Examples of command economies are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An economic system

Correct AnswerverifiedShow Answer

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.

Correct AnswerverifiedShow Answer

In a market economy, a significant change in consumers' desire for product X will

Correct AnswerverifiedShow Answer

Costs can be defined as total payments made to workers, landowners, and capital suppliers less payments to the entrepreneur for organizing and combining the other resources used to produce a good.

Correct AnswerverifiedShow Answer

In the simple circular flow model,

Correct AnswerverifiedShow Answer

Firms are motivated to minimize production costs because

Correct AnswerverifiedShow Answer

Which of the following is a fundamental characteristic of the market system?

Correct AnswerverifiedShow Answer

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

Correct AnswerverifiedShow Answer

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