Question 1

If a nation restricts trade with other nations, then the most likely effect is

Accepted Answer

A)   lower prices of goods and services in the nation.
B)   increased specialization of production.
C)   expanded economic wealth of the nation.
D)   consumers in the nation are made worse off.E) A) and B)
F) A) and D)

Question 2

Which of the following does not illustrate the idea of creative destruction?

Accepted Answer

A)   Digital downloads have shrunk the market for CDs and DVDs.
B)   Online retail sales have increased, while brick-and-mortar sales have slowed down.
C)   The opening of a new mall reduces the traffic in another mall.
D)   A firm has to destroy some of the expired products in its inventory.E) A) and B)
F) None of the above

Question 3

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the

Accepted Answer

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

Question 4

The circular flow model illustrates

Accepted Answer

A)   the importance of having a central plan for the economy.
B)   how capital and other resources are created.
C)   how money is created by the banking system.
D)   the interdependence of businesses and consumers.E) B) and D)
F) B) and C)

Question 5

Selfishness and self-interest are identical concepts in economics.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)   sole proprietorship
B)   partnership
C)   public agency
D)   corporationE) A) and B)
F) A) and D)

Question 7

In a market system, as one industry expands while another contracts, resources will flow

Accepted Answer

A)   away from the expanding industry toward the contracting one.
B)   across industries, driven by the changes in resource prices paid by firms.
C)   toward the industry where the product demand is declining.
D)   because resource allocation will have to equalize between the two industries.E) A) and C)
F) B) and C)

Question 8

Economic systems differ from one another based on who owns the factors of production and

Accepted Answer

A)   how many resources are available in the economy and where they are located.
B)   how economic activities are coordinated and directed.
C)   what kinds of products are produced in the economy and how they are sold.
D)   how big the population is and the makeup of the population.E) None of the above
F) All of the above

Question 9

Command systems are also known as

Accepted Answer

A)   market systems.
B)   pure capitalism.
C)   laissez-faire capitalism.
D)   communism.E) A) and B)
F) A) and C)

Question 10

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

Accepted Answer

A) True 
 B)False

Question 11

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 organization.E) A) and B)
F) A) and C)

Question 12

The French term "laissez-faire" means

Accepted Answer

A)   "there is no free lunch."
B)   "let it be."
C)   "circular flow."
D)   "public ownership."E) None of the above
F) A) and D)

Question 13

Economic profits in an industry suggest the industry

Accepted Answer

A)   can earn more profits by increasing product price.
B)   should be larger to better satisfy consumers' desire for the product.
C)   has excess production capacity.
D)   is the size that consumers want it to be.E) All of the above
F) A) and C)

Question 14

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

Accepted Answer

The answer of Enterprise managers and workers in the Soviet...

Question 15

According to economist Donald Boudreaux in the "Last Word" section of the chapter, what best explains why the market system is not a random, chaotic mess?

Accepted Answer

A)   There is active cooperation among private property owners and government officials to correct the excesses of a market economy.
B)   The roundabout methods of production allocate resources from consumers to producers in an orderly fashion.
C)   Government planning limits the chaos, and the government regulates economic activity to create stability in the market.
D)   Private property rights encourage mutual accommodation that leads to an arrangement of resources that is productive.E) B) and C)
F) A) and D)

Question 16

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Accepted Answer

A) True 
 B)False

Question 17

All of the following statements describe a market economy except

Accepted Answer

A)   government prescribes the market prices for goods and services.
B)   prices provide important signals to buyers and sellers.
C)   the allocation of resources is determined by their prices.
D)   the actions of buyers and sellers establish a product's price.E) All of the above
F) None of the above

Question 18

In the circular flow diagram, firms get their ability to pay for the costs of production from the

Accepted Answer

A)   revenues they receive for their products.
B)   resources they acquire in the resource markets.
C)   incomes they earn for their resources.
D)   goods and services they get in the product markets.E) All of the above
F) C) and D)

Question 19

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems,

Accepted Answer

A)   the division of output is decided by central planning rather than by individuals operating freely through markets.
B)   all economic decisions are made by the government, whereas there is no government in laissez-faire capitalism.
C)   scarcity does not exist, whereas it does in laissez-faire capitalism.
D)   money is not used, whereas it is in laissez-faire capitalism.E) A) and B)
F) B) and C)

Question 20

Capitalism gets its name from the fact that capital resources are mostly

Accepted Answer

A)   owned by the state or government.
B)   given the highest priority in the economy's income distribution.
C)   treated as private property.
D)   in the form of money and financial resources.E) None of the above
F) All of the above

Exam 2: The Market System and the Circular Flow

Which of the following does not illustrate the idea of creative destruction?

Correct Answer
verified

Command systems are also known as

Correct Answer
verified

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems,

Correct Answer
verified

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

Correct Answer
verified

Economic profits in an industry suggest the industry

Correct Answer
verified

Correct Answer
verified

In a market system, as one industry expands while another contracts, resources will flow

Correct Answer
verified

Economic systems differ from one another based on who owns the factors of production and

Correct Answer
verified

If a nation restricts trade with other nations, then the most likely effect is

Correct Answer
verified

The French term "laissez-faire" means

Correct Answer
verified

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the

Correct Answer
verified

The circular flow model illustrates

Correct Answer
verified

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Correct Answer
verified

According to economist Donald Boudreaux in the "Last Word" section of the chapter, what best explains why the market system is not a random, chaotic mess?

Correct Answer
verified

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

Correct Answer
verified

In the circular flow diagram, firms get their ability to pay for the costs of production from the

Correct Answer
verified

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

Correct Answer
verified

All of the following statements describe a market economy except

Correct Answer
verified

Selfishness and self-interest are identical concepts in economics.

Correct Answer
verified

Capitalism gets its name from the fact that capital resources are mostly

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

Which of the following does not illustrate the idea of creative destruction?

Correct AnswerverifiedShow Answer

Command systems are also known as

Correct AnswerverifiedShow Answer

A fundamental difference between the command system and laissez-faire capitalism is that, in command systems,

Correct AnswerverifiedShow Answer

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

Correct AnswerverifiedShow Answer

Economic profits in an industry suggest the industry

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a market system, as one industry expands while another contracts, resources will flow

Correct AnswerverifiedShow Answer

Economic systems differ from one another based on who owns the factors of production and

Correct AnswerverifiedShow Answer

If a nation restricts trade with other nations, then the most likely effect is

Correct AnswerverifiedShow Answer

The French term "laissez-faire" means

Correct AnswerverifiedShow Answer

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the

Correct AnswerverifiedShow Answer

The circular flow model illustrates

Correct AnswerverifiedShow Answer

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Correct AnswerverifiedShow Answer

According to economist Donald Boudreaux in the "Last Word" section of the chapter, what best explains why the market system is not a random, chaotic mess?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the circular flow diagram, firms get their ability to pay for the costs of production from the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All of the following statements describe a market economy except

Correct AnswerverifiedShow Answer

Selfishness and self-interest are identical concepts in economics.

Correct AnswerverifiedShow Answer

Capitalism gets its name from the fact that capital resources are mostly

Correct AnswerverifiedShow Answer

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