Question 1

Barter

Accepted Answer

A)   is the major means of exchange in centrally planned economies.
B)   accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy.
C)   entails the exchange of goods for goods.
D)   is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers.E) A) and B)
F) A) and C)

Question 2

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

Question 3

Which of the following is one of the Five Fundamental Questions?

Accepted Answer

A)   Which products will be in scarce supply and which in excess supply?
B)   Who should appoint the head of the central bank?
C)   How much should society save?
D)   What goods and services will be produced?E) C) and D)
F) None of the above

Question 4

An increase in consumer desire for strawberries is most likely to

Accepted Answer

A)   increase the number of strawberry pickers needed by farmers.
B)   reduce the supply of strawberries.
C)   reduce the number of people willing to pick strawberries.
D)   reduce the need for strawberry pickers.E) A) and B)
F) A) and C)

Question 5

Two major virtues of the market system are that it

Accepted Answer

A)   allocates resources efficiently and allows economic freedom.
B)   results in an equitable personal distribution of income and always maintains full employment.
C)   results in price-level stability and a fair personal distribution of income.
D)   eliminates discrimination and minimizes environmental pollution.E) A) and C)
F) A) and B)

Question 6

One essential trade-off involving business risk in a market system is reflected in which of the following statements?

Accepted Answer

A)   Access to the firm's profits and gains are open only to those who take on the business risk of the firm.
B)   Those who receive guaranteed payments from the firm are also guaranteed a share of the firm's profits.
C)   Those who make bad decisions regarding risk will suffer losses; those who decide wisely will gain profits.
D)   Those who bear the business risk of the firm are guaranteed to always gain profits.E) None of the above
F) B) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements about the right to private ownership is false?

Accepted Answer

A)   It enables individuals to obtain, use, and dispose of land and capital resources as they see fit.
B)   It encourages investment and innovation, and thus fosters economic growth.
C)   It extends to intangibles such as pieces of music and computer programs.
D)   It weakens the incentive to maintain the property that one already owns.E) A) and B)
F) A) and C) D

Question 9

By freedom of enterprise, we mean that individual

Accepted Answer

A)   workers are free to look for jobs and work in whichever firm will hire them.
B)   firms are free to employ resources, to produce their output, and to sell their products.
C)   producers are free to produce whatever the government decides is needed by the society.
D)   consumers are free to buy whatever products will satisfy their needs the most.E) None of the above
F) B) and C)

Question 10

Competition in a market system denotes a condition where

Accepted Answer

A)   the diffusion of economic power limits its potential abuse.
B)   any given product can be purchased at a wide range of prices.
C)   contractual agreements among individual firms are restricted and avoided.
D)   a few large, dominant sellers are constantly jostling for market share.E) All of the above
F) B) and D)

Question 11

Which of the following statements about markets and prices is correct?

Accepted Answer

A)   In a market system, buyers and sellers must be in face-to-face contact with each other.
B)   Prices affect the distribution of goods in a market system, but not the allocation of resources.
C)   In a market system, prices serve to ration goods and services to consumers.
D)   The operation of a market system has little, if any, effect on the distribution of income in the economy.E) A) and B)
F) All of the above

Question 12

If competitive industry Z is making substantial economic profit, output will

Accepted Answer

A)   fall in industry Z and firms will likely leave the market.
B)   fall in all industries except industry Z.
C)   expand in industry Z, as more resources will move to that industry.
D)   expand in industry Z, but no new firms will enter the market.E) B) and C)
F) A) and C) C

Question 13

With specialization in a market economy, individual

Accepted Answer

A)   firms produce a wide range of products.
B)   producers consume little or none of the products they produce.
C)   producers consume most of the output that they produce.
D)   consumers have to produce most of what they consume.E) None of the above
F) A) and B) B

Question 14

Specialization may expand total output even though the individuals involved may have identical abilities.

Accepted Answer

A) True 
 B)False

Question 15

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially
A)"Those most willing and able to pay for them."
B)"Those who physically produced them."
C)"Those who most need them."
D)"Those who get utility from them."

Accepted Answer

The answer of The market system's answer to the fundamental...

Question 16

Refer to the provided figure. If box A represents households, B the product market, and C businesses, and if flow (3)  represents revenues, then flow (1)  would represent

Accepted Answer

A)   costs.
B)   money income.
C)   consumption expenditures.
D)   resources.E) A) and B)
F) A) and C)

Question 17

Which of the following statements about self-interest in a market system is false?

Accepted Answer

A)   Self-interest usually motivates an individual to deliver something of value to others.
B)   Self-interest of entrepreneurs implies seeking maximum profits or minimum losses.
C)   Self-interest applies only to capitalists and entrepreneurs, not to workers employed by others.
D)   In a market system, consumers are just like firms: self-interest is what motivates them.E) B) and C)
F) None of the above

Question 18

"Creative destruction" in a market system is brought about by

Accepted Answer

A)   entrepreneurship.
B)   striking workers.
C)   regulation by the government.
D)   money-based trade.E) A) and D)
F) B) and D)

Question 19

The main characteristics of a modern market system include all of the following except

Accepted Answer

A)   entrepreneurs are free to obtain and use resources to produce goods and services.
B)   consumers are free to buy goods and services that their budgets allow.
C)   economic power is diffused by competition among economic units.
D)   government is restricted to national defense and does not intervene at all in various markets.E) B) and C)
F) A) and B)

Question 20

In a market system, the distribution of goods and services among consumers is largely determined by

Accepted Answer

A)   the willingness and ability of consumers to pay the prices.
B)   whoever needs the goods and services the most.
C)   whoever has the closest connection to firms and the government.
D)   a random factor that is almost impossible to predict.E) None of the above
F) All of the above

Exam 2: The Market System and the Circular Flow

Barter

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 AnswerverifiedShow Answer

Which of the following is one of the Five Fundamental Questions?

Correct AnswerverifiedShow Answer

An increase in consumer desire for strawberries is most likely to

Correct AnswerverifiedShow Answer

Two major virtues of the market system are that it

Correct AnswerverifiedShow Answer

One essential trade-off involving business risk in a market system is reflected in which of the following statements?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements about the right to private ownership is false?

Correct AnswerverifiedD

By freedom of enterprise, we mean that individual

Correct AnswerverifiedShow Answer

Competition in a market system denotes a condition where

Correct AnswerverifiedShow Answer

Which of the following statements about markets and prices is correct?

Correct AnswerverifiedShow Answer

If competitive industry Z is making substantial economic profit, output will

Correct AnswerverifiedC

With specialization in a market economy, individual

Correct AnswerverifiedB

Specialization may expand total output even though the individuals involved may have identical abilities.

Correct AnswerverifiedShow Answer

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially A)"Those most willing and able to pay for them." B)"Those who physically produced them." C)"Those who most need them." D)"Those who get utility from them."

Correct AnswerverifiedShow Answer

Refer to the provided figure. If box A represents households, B the product market, and C businesses, and if flow (3) represents revenues, then flow (1) would represent

Correct AnswerverifiedShow Answer

Which of the following statements about self-interest in a market system is false?

Correct AnswerverifiedShow Answer

"Creative destruction" in a market system is brought about by

Correct AnswerverifiedShow Answer

The main characteristics of a modern market system include all of the following except

Correct AnswerverifiedShow Answer

In a market system, the distribution of goods and services among consumers is largely determined by

Correct AnswerverifiedShow Answer

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D

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C

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B

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