Question 1

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Accepted Answer

A) True 
 B)False

Question 2

In terms of the circular flow diagram, businesses obtain revenue through the market and make expenditures in the market.

Accepted Answer

A)  product; financial
B)  resource; product
C)  product; resource
D)  capital; productE) C) and D)
F) B) and C)

Question 3

Which of the following is not one of the five fundamental questions that an economy must deal with?

Accepted Answer

A)  How will the goods and services be produced?
B)  Why should the goods and services be produced?
C)  Who is to receive the goods and services produced in the economy?
D)  In what ways will progress be promoted?E) A) and D)
F) A) and C)

Question 4

Profits are the primary "success indicator" for firms in a centrally planned economy.

Accepted Answer

A) True 
 B)False

Question 5

Central planning in the Soviet Union and pre-reform China emphasized expanding the production of consumer goods to raise the domestic standard of living.Topic: Economic Systems

Accepted Answer

A) True 
 B)False

Question 6

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 7

Which of the following is not a reason why specialization and trade are beneficial to society?

Accepted Answer

A)  The total output of economic goods may be increased even without any increase in resources.
B)  Scarce resources are utilized more efficiently by exploiting differences among them.
C)  Specialization fosters learning by doing, thus lowering the unit-costs of products.
D)  Firms and workers become less dependent on others for producing goods and services.E) A) and B)
F) A) and C)

Question 8

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.Topic: Economic SystemsE) A) and C)
F) A) and B)

Question 9

In a market economy, the distribution of output will be determined primarily by

Accepted Answer

A)  consumer needs and preferences.
B)  the quantities and prices of the resources that households supply.
C)  government regulations that provide a minimum income for all.
D)  a social consensus as to which distribution of income is most equitable.E) B) and C)
F) A) and D)

Question 10

Continued losses in an industry will cause some firms to reduce output or eventually leave the industry.

Accepted Answer

A) True 
 B)False

Question 11

Economic efficiency entails producing a certain output with the minimum number of units of inputs.Difficulty: 02 Medium
Learning Objective: 02-03 Explain how the market system answers the five fundamental questions of what to produce, how to produce, who obtains the output, how to adjust to change, and how to promote progress.Test Bank: II Topic: Five Fundamental Questions

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.Difficulty: 02 Medium
Learning Objective: 02-05 Describe the mechanics of the circular flow model.Test Bank: II Topic: The Circular Flow Model

Accepted Answer

A) True 
 B)False

Question 14

The market system

Accepted Answer

A)  produces considerable inefficiency in the use of scarce resources.
B)  effectively harnesses the incentives of workers and entrepreneurs.
C)  is not consistent with freedom of choice in the long run.
D)  has slowly lost ground to emerging command systems.E) B) and C)
F) A) and B)

Question 15

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

Accepted Answer

A) True 
 B)False

Question 16

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-interest.Difficulty: 02 MediumE) A) and D)
F) All of the above

Question 17

The economy of the United States in the past can best be described as laissez-faire capitalism.

Accepted Answer

A) True 
 B)False

Question 18

Broadl y defined, competition involves

Accepted Answer

A)  private property and freedom of expression.
B)  independently acting buyers and sellers and freedom to enter or leave markets.
C)  increasing opportunity costs and diminishing marginal utility.
D)  capital goods and division of labor.E) B) and C)
F) A) and B)

Question 19

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an invisible hand, promoting the public interest.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 2: The Market System and the Circular Flow

Continued losses in an industry will cause some firms to reduce output or eventually leave the industry.

Correct Answer
verified

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.Difficulty: 02 Medium Learning Objective: 02-05 Describe the mechanics of the circular flow model.Test Bank: II Topic: The Circular Flow Model

Correct Answer
verified

Central planning in the Soviet Union and pre-reform China emphasized expanding the production of consumer goods to raise the domestic standard of living.Topic: Economic Systems

Correct Answer
verified

Which of the following is not a reason why specialization and trade are beneficial to society?

Correct Answer
verified

Broadl y defined, competition involves

Correct Answer
verified

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

Correct Answer
verified

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Correct Answer
verified

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an invisible hand, promoting the public interest.

Correct Answer
verified

In a market economy, the distribution of output will be determined primarily by

Correct Answer
verified

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

Correct Answer
verified

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

Correct Answer
verified

The market system

Correct Answer
verified

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

Correct Answer
verified

In terms of the circular flow diagram, businesses obtain revenue through the market and make expenditures in the market.

Correct Answer
verified

The economy of the United States in the past can best be described as laissez-faire capitalism.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Which of the following is not one of the five fundamental questions that an economy must deal with?

Correct Answer
verified

Profits are the primary "success indicator" for firms in a centrally planned economy.

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

Exam 2: The Market System and the Circular Flow

Continued losses in an industry will cause some firms to reduce output or eventually leave the industry.

Correct AnswerverifiedShow Answer

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.Difficulty: 02 Medium Learning Objective: 02-05 Describe the mechanics of the circular flow model.Test Bank: II Topic: The Circular Flow Model

Correct AnswerverifiedShow Answer

Central planning in the Soviet Union and pre-reform China emphasized expanding the production of consumer goods to raise the domestic standard of living.Topic: Economic Systems

Correct AnswerverifiedShow Answer

Which of the following is not a reason why specialization and trade are beneficial to society?

Correct AnswerverifiedShow Answer

Broadl y defined, competition involves

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Correct AnswerverifiedShow Answer

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an invisible hand, promoting the public interest.

Correct AnswerverifiedShow Answer

In a market economy, the distribution of output will be determined primarily by

Correct AnswerverifiedShow Answer

The invisible hand refers to the many indirect controls that the federal government imposes in a market system.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The market system

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In terms of the circular flow diagram, businesses obtain revenue through the market and make expenditures in the market.

Correct AnswerverifiedShow Answer

The economy of the United States in the past can best be described as laissez-faire capitalism.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not one of the five fundamental questions that an economy must deal with?

Correct AnswerverifiedShow Answer

Profits are the primary "success indicator" for firms in a centrally planned economy.

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

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